- Reuters
- , Monday March 31 2008
LONDON, March 31 (Reuters) - The European Union's executive
Commission is set to publish this week 2007 carbon emissions
data suggesting a future shortage of emissions permits for heavy
industry, under-pinning future carbon prices.
The Commission has said that if it has gathered sufficient
data it will publish the data at 1200 Brussels time (1000 GMT)
on Tuesday.
The carbon market is supposed to work by putting a price on
carbon emissions, forcing businesses to trim their contribution
to climate change, for example by being more energy efficient.
"The big picture is that the long-term price signal is
higher than up till now," said Deutsche Bank's Mark Lewis.
Two years ago carbon prices collapsed after a surplus of
emissions permits emerged in the first year of the first,
three-year trading cycle of the carbon market from 2005-07.
The latest emissions data will likely show yet another
surplus of permits, called European Union Allowances (EUAs), by
more than 100 million tonnes of carbon dioxide (CO2), for
participating sectors including metals, power utilities and pulp
and paper.
The scheme had no mechanism within its first cycle to adjust
the supply of EUAs meaning that the surplus -- attributed by
critics to successful lobbying by big business -- persisted
until 2007, causing a carbon price collapse.
The Commission had to wait until 2008 to make that
adjustment and has done enough to ensure higher carbon prices in
future, analysts say.
Including new EU entrants Bulgaria and Romania, the 2008
quota of permits is less than 2.1 billion tonnes of CO2 compared
to 2.3 billion tonnes in 2007, said Lewis, who forecasts 2007
emissions of between 2.1 and 2.14 billion tonnes.
UBS analyst Per Lekander forecast 2007 emissions slightly up
on 2006 emissions at around 2.15 billion tonnes.
Assuming all else were equal 2008 emissions would be some 84
million tonnes higher than 2007 because of the inclusion of new
installations, which would make the market short in 2008 by at
least 100 million EUAs, Lewis estimated.
That would drive emissions cuts, as the scheme intended, for
example forcing utilities to burn lower carbon-emitting gas
rather than coal. EUAs were trading up 44 cents at 22.2 euros
late on Monday.
