As Lord Stern pointed out in his seminal report, climate change is the market’s biggest failure. So it has been left to governments to create the conditions that will force greater efficiency and reduce emissions. But they have mainly resorted to a market mechanism, emissions trading, to achieve these goals. The success of trading schemes, like the EU ETS, depends on carbon being priced high enough to provide a sufficient incentive to participants to invest in energy efficiency measures and to make investment in low-carbon technologies more viable. The recession has forced down prices of ETS allowances because having slashed output firms are awash with surplus permits. In its recent report, the government’s Climate Change Committee concluded that the recession will drive down the price of EU emissions trading scheme allowance in 2020 to around €20 – they are currently trading at just over €13. It is a far cry from the €51 that the CCC predicted in 2008 would be required to meet the EU’s 2020 target to reduce GHG emissions by 30%. If policymakers want carbon markets to drive reductions in GHG emissions they will need to intervene and strengthen the price of carbon, by, for example, underwriting a minimum price. Leaving it to the market risks another failure.