Today's bulletin is really a short addendum to last Friday's rather longish piece about what's going wrong in the EU's Emissions Trading Scheme. I noted then that this evolved into a bankers ramp, in which the only rational expectation is for prices to continue to rise. Which they continue to do, threatening to cramp EU growth whilst at the same time as pushing up prices - the classic ingredients for stagflation.
This piece looks at the historic relationship between movements in Europe's economic growth and the CO2 price. Between 2009 and end-2017 these moved predictably in sync (98% confidence). Using that same model today, CO2 price have risen to between 12 and 14 times what one would expect to be justified by the underlying economic conditions. The dislocation, this unacknowleged and damaging tax on EU production and consumption will only rise.
