The second section of the London Financial Times, dealing with company and market news, is often illuminating.  On 2 February, there were contrasting articles, one on the ‘battery boom’ now underway and the other reporting that a fall in the carbon dioxide price was a risk to ‘green investment’.

The prospect of electric cars is spurring electronics companies to invest billions of dollars in new lithium-ion battery plants.  Other big markets are mobile devices (phones, computers etc), and for storage of future excesses of renewable electricity.  It seems that Panasonic’s takeover bid for Sanyo Electric reflected a desire to get hold of the world’s leading lithium-ion technology.   Toshiba is to start mass production of a battery technology which can reach up to 90% of full charge in as little as five minutes.

Meanwhile, the price of carbon dioxide in the European Union has fallen so low that it no longer provides an incentive to low-carbon development.   The price of permits to emit the gas, issued by the EU’s emissions trading scheme, have reached record lows at €12/tonne, about half that necessary for there to be an impact on investment decisions.   The carbon price has been volatile and closely correlated to energy prices - as the price of oil has fallen drastically, so has the price of carbon.

The intention of carbon trading is to incentivize investment in low-carbon technologies, such as electric-powered vehicles.  The challenge for investors is to judge the long run price of carbon.   The challenge for policy is to devise incentives that send appropriate signals.   Would a carbon tax be more effective in this regards that a traded carbon price?