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I’m in Copenhagen this week for the Carbon Market Insights Conference. I’m blogging about it for the Guardian – the first scene setter was posted [here](http://www.guardian.co.uk/environment/blog/2009/mar/13/carbon-trading-climate-change “”) last week.

One of the selling points of this conference is that it is taking place in the same venue as the hugely important [Conference of Parties](http://unfccc.int/2860.php “”) to the UN Framework Convention on Climate Change in December of this year. Arriving there by Metro this evening in the drizzle I was confronted by a building site around which you have to walk to the West Entrance of the euphemistically titled ‘Bella’ Centre. No, you can’t gain access through the East entrance and no, the building works won’t be complete by December. Yes, there is an enormous wind turbine gracing the main entrance though – the Danes, unlike the Brits, have welcomed wind power into their hearts, landscapes, cities, ports and car parks – even airports seem to pose no problem. Energy efficiency light bulbs and cycle lanes also abound. So I can forgive them the annoying walk in the drizzle and the fact that, weirdly, there is no metro connection at the central railway station.

The conference kicked off this evening with a ‘carbon markets 101’ teach-in for the uninitiated. It was reasonably well attended and the presentations ran through the complexities of the international and EU trading schemes as straightforwardly as is probably humanly possible. But I couldn’t help wishing my comedian friends who tried [explaining emissions trading using biscuits](http://www.youtube.com/watch?v=QNUabVPfNLc “”) had been given the job of kicking things off. For such an important part of the climate change debate I have to admit emissions trading can really appear quite an unappealing subject and this must be why most people happily ignore its existence. Even though it costs us all money and effectively sets the level of global warming we’re happy to tolerate.

The most sobering part of the talk were the graphic displays of the price crashes that have happened in the first and current phases of the EU trading scheme. You can blame oil prices, lack of information or the weather but it’s absolutely clear that there are lots of permits out there as well as lots of cheap ways of saving emissions. So it’s a simple question of supply and demand – the levels of the caps have been set too high.

But this time, even with a potentially long lasting recession taking hold of the economy, reducing emissions faster than any policy intervention would ever dare, the price will not hit zero. This is because you can carry forward spare permits apparently indefinitely. Of course this will mean the lower prices in the next phase too, but, for now, it helpfully masks the fact that Europe has got it wrong again.

So the next meeting in this wonderful city really does need to deliver a deal because only then can Europe stick to its word and tighten its caps so that they actually generate a reasonable price. An increase from a target of a 20% cut (compared to 1990) to the proposed 30% is unlikely to be enough especially if the global deal includes lots more cheap permits from new trading schemes including creating credits for avoided deforestation and carbon capture and storage.

So all this should be good news: if the EU can strip out all the spare permits or ‘hot air’ created by the recession, and, in spending its way out of the gloom, upgrade our energy systems to deliver lower carbon footprints, then we can march confidently into the negotiations in December with a much more ambitious target in our back pockets. Even if we have to take a detour around a building site in the rain to get there.