The preacher has fallen out of his pulpit. The European Union, which has been chief proselytiser for the Kyoto climate change treaty and for trading of carbon permits as the best way of meeting Kyoto's goals, has just seen its emissions trading system dissolve into chaos. The carbon price first crashed, and then shot up and down this week as the EU has struggled to cope with the mess of its scheme's first phase. Yet Kyoto depends crucially on the EU salvaging its system so that it can form the core of a wider scheme bringing in others such as Japan and Russia.

While this week's chaotic trading may bring smiles to anti-Kyoto members of the Bush administration, it is not cause to condemn the system's basic design. Though far more complex than the single-nation system pioneered by the US to trade permits for sulphur emissions producing acid rain, the EU system is functioning well as an exchange across 25 countries. The verification procedure also appears to be working well, in a sense almost too well. For the reason why the price crashed is that, overall, EU companies have now reported emitting less carbon last year than their respective national governments had negotiated for them in terms of pollution allowances. It would be nice to think this was all due to actual reduction in pollution; if only that environmental progress could be so sudden. Equally, it would be too cynical to put it all down to faked reduction in pollution; the companies have to report figures verified by independent environmental auditors. The main reason is the tendency of companies to be optimistic about growth of their future business (and therefore of their pollution), and of their governments to accommodate them.