The European Union has been the home of one of the largest cap and trade systems fro carbon emissions. According to the president of BusinessEurope, Jurgen Thumann, the system that has been in place since 2005 is not only one of the largest, but the costliest environmental policy in the world.

The cap and trade policy gives major carbon producers an initial allowance that they can trade to suit their needs. Ideally, the system coerces companies to develop more carbon neutral facilities – the revenue from selling excess allowances would offset the cost of implementation of new greener technology. Furthermore, it wouldn’t put some sectors out business since they could always purchase more credits from those who’ve adapted early to the new pollution policies.

It seems like a fairly simple, effective means to curb emissions and promote investment in environmental technology, but there have been a few problems. First of all, Europe’s system is one of kind. Many companies in the E.U. have trouble staying competitive. Internal squabbling over fair distribution of carbon credits compounds the problem. At the moment, multiple countries are lobbying for higher allowances for certain sectors of their economies.

The idea was good. The E.U., however, can’t hope to implement the system effectively if there is disagreement over its target. Businesses don’t seem to like, many consumers dislike the pricing effects and the infighting between E.U. members is complicating everything. To top it all off, the carbon limit system has no hope of ever achieving anything if it hamstrings industry. Political leaders will have to scale back on short-term caps in hopes of letting the system last long enough to be effective.