First the good news - greenhouse-gas emissions from heavy industry and utilities in the European Union fell 6% last year raising hopes that the EU will be able to meet and possible exceed their targets for cutting emissions as part of the Kyoto protocol. Cement factories, steel works and power stations are among over 10,000 industrial installations that are covered by the EU carbon emissions trading scheme which was launched in January 2005.

But how much of this welcome decline in emissions is down to the working of the carbon market is open to question. The price of carbon permits has slumped as the EU economy has nose dived into a deep recession. Indeed the price for a 2009 carbon permit is currently hovering just above Euro 12 a tonne - hardly the short of price that will give businesses the incentive to spend big sums of money on adoption of low-carbon technologies in factories and power plants. Putting a price on carbon is designed to change behaviour - but the price needs to make a difference and be sustained over a long enough period of time.

UK emissions decreased 6.8% to 254 million tonnes, while German emissions dropped 3.2% to 457 million tonnes - German industry is suffering greatly from the collapse in world trade and decline in demand for manufactured goods and capital equipment.

A quick extra point - under Phase 2 of the EU ETS, up to 10 per cent of carbon emission allocations can be auctioned off. The UK Debt Management Office has this responsibility for the UK and this section of their web site might be a useful port of call for teachers and students wanting to know more.

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