Germany’s Nuclear Phase Out And Europe’s Carbon Cap

I’ve expressed some concern ever since Fukushima that backlash against nuclear power will end up increasing carbon emissions as countries find themselves relying more on coal. Specifically, I gave credence to reports that Germany’s decision to phase out nuclear power will lead to an emissions boost. Kantoos notes, however, (in German, but Google Translate works) that Europe’s carbon emissions are capped so in principle emissions can’t rise above the target. What we’re actually seeing is a spike in the speculative price of carbon permits:

The risks here are, in essence, political. Politicians may respond to higher price pressure by relaxing emissions targets. But the genius of a cap-and-trade system is that absent that additional step, emissions don’t rise even if things like a nuclear phaseout happen.