The plan wasn't to reduce CO2, or to manage the environment, or to reduce pollution (assuming you'd consider CO2 as pollution)?

The goal was specifically to direct funding of corporation's money into one specific sector of the economy; the "clean energy" and "green" companies?

So, now with the downturn; your "chosen winners" aren't making out like bandits as expected; sure CO2 production is down, the cap is still in place, and CO2 emissions are under the expected level… none of that matters.

The problem is the "greening" companies aren't getting paid the fat cash. It makes my heart break to think that they're not getting their Government policy decided funding.

Thanks for the honesty declaring what the real goal and intent of the cap & trade policy was. Nothing to do with CO2 emissions, environment, warming, or anything else… just lining the pockets of the "green" companies.

Maybe next time you'll just rob the taxpayers and give their money directly to avoid this sort of complication.

However, your argument that "they have to have as similar a cost base as their Chinese, Indian or whatever competition," assumes that they do. Using that argument, why doesn't the EU allow/encourage European manufacturers to pay their employees a Euro or two per day? Why? Because it's wrong. Why don't European manufacturers dump their manufacturing waste in rivers? There are lots of things Chinese and Indian companies do to gain a competitive advantage that European companies do not.

The competition argument will only go so far, my friend.

1. EU industrials were given emissions allowances roughly equivalent to their business-as-usual emissions, to ensure they didn’t have to buy allowances which would hit their international competitiveness.
Whether you agree with this or not, EU companies are not in the business of being charitable to their non-carbon constrained competitors around the world. So in order for them to stay competitive, they have to have as similar a cost base as their Chinese, Indian or whatever competition. Hence the free allocation of allowances. You can bet your bottom dollar that the day India and China start auctioning allowances to their own companies, the EU will be doing the same.
Let’s overlook the fact that there’s going to be a lot of auctioning anyway from 2012 onwards in the EU.

2. EU industrial output is collapsing. Therefore, so are emissions. (And I know this isn’t HOW emissions were supposed to fall, but they are.)
So EU industrial companies have surplus allowances – they won’t need them AT ALL.
They also can’t get loans because banks aren’t lending to anyone without a gold-plated credit rating, they’re running low on cash because their sales have plummeted, and they have bills to pay.
So what’s a company to do? They have these allowances floating around, they don’t need them, but they’re worth €10 a tonne on the market.
It’s not hard to figure out, is it? It makes Good Sense to sell these allowances. They’d be idiots not to.

3. Now, if these allowances had been auctioned rather than given out for free, then sure, these companies would be selling them just the same as they are now, to stay alive. But they’d ALSO be lobbying the government to give them back the money they spent on these allowances (in the form of govt. handouts) so they can stay afloat.
The revenue from the sale of these free allowances has essentially replaced government handouts. So we, taxpayers, aren’t subsidising another failing part of the economy. Hey! Free allocation helped you and me out!

Now, what Giles hasn’t found out yet is that industrial companies are selling MORE than just their surplus. Because allowances for calendar 2009 are going to be handed out on Feb 28, and because companies only have to surrender allowances to cover their 2008 emissions by March 31, they’re able to effectively “borrow” 2009 allowances and put them towards their 2008 compliance.

What this means is that a company can sell ALL its 2008 allowances to raise short-term cash, and then use ALL its 2009 allowances to cover its 2008 emissions.

And that is what’s more important than just the sale of surpluses. Companies in the EU are so scared of going bankrupt in 2009 that they’re basically doing whatever they can to survive, even if that means mortgaging their future compliance with the emissions trading scheme.