The position of the British government is that in order to drive the transition that we believe is needed nationally, one way or another we have to price carbon into the national economy and into the international economy. We believe that carbon trading is one important tool for that purpose, but not the only one. We think it probably needs to be balanced also with levies of different kinds, and we have a climate change levy and other regulation to drive change.
But we think the price instrument is one important mechanism for driving the change, and we certainly believe that carbon trading is a useful mechanism. We already have a European trading scheme, which is trading more than $100 billion now, so it's a big market.
What I would also say is that up to now it has not been a very successful market. I think critics are right to say that the early experience of the European trading scheme has been mixed at best, if not bad. In the early stages, far too many permits were issued, so there was a collapse of the market. The Russian economy didn't develop as they had hoped, so they found themselves with a lot of sovereign credits that got dumped into the market.
We launched the second iteration two years ago. That created a much firmer price. We reduced the number of permits in the market, but that too.... The price has now gone down to roughly $20 a tonne as a result of a lot of people needing to get cash because of their cash positions being weak in the recession. They dumped a lot of credits into the market, and the price has fallen to $20. I think we're probably going to have to prop up the price through levies and other mechanisms.
But we're hoping that in the third iteration of the scheme we can have a fully auctioned system that will harden up the price. We certainly think the price at the moment is not high enough in itself to drive the transition that's needed; nevertheless, carbon trading is an important tool.