The Cap and Trade market for Carbon Offsets has failed in the EU. A ton of CO2 is down to &euro 8 from an expected &euro 35- &euro 45.

Politicians like Cap and Trade over a straight Pigovian carbon tax because it allows them to indirectly tax (insulating them from their voters) and then allows them to dole out favors to industry. It is therefor amazingly less efficient compared to say taxing carbon outputs directly and cutting other taxes directly to offset the increase.

You of course will not hear much about the market failure because it doesn't fit any "popular" agenda. Also, all this leaves aside whether we even should be taxing C02 (do we tax people for having wee little C02 polluting machines? Can the EPA regulate breathing?) What I find most amusing in the article though is that the answer to this completely predictable "market failure" is - wait for it - more regulation and more power to the politicians.

Can I cap and trade my politician with the prison system?