As I said, in the third iteration of the European scheme, we hope to have a fully auctioned system, and I think that is the best way of managing the allocation, because then the market can determine how that allocation should be made. It depends on how much people are willing to pay for the permits. In that way, the allocation is driven by market expectations, and that would be the best way of doing it.
As I said in the early stages, we had too much permit put into the market, which meant that we had weakness in the market, but we have a second problem, I would say, in Europe. There is some uncertainty about the right of the European Commission to limit the allocations given to member states, and we have two member states that have brought a case against the European Commission, saying it has been too aggressive in reducing their allocations. That case is still being heard in the European Court of Justice. The first judgment was against the commission, and if the commission loses that case, that could be very damaging to the market if countries are able to increase their allocations.
I won't go on much longer, but one other point I would make is that there are undoubtedly problems with carbon markets. You get people who are looking to “game” the system and are going into this as a profit-making opportunity by acting as brokers and middlemen and so on--I wouldn't say manipulating the market, but at least trying to find a rent-taking position within the market. I think we should be honest about that. That is a problem with carbon markets and something we have to be very careful about. I would also say there's been a problem in the early rounds with the auditing of things like the clean development mechanism, which we need again in the next stages of developing an international framework. We need much better monitoring, verification, and reporting so that we can be more confident about the basis for the market.