Increasing pessimism over European carbon market – Survey

According to results from the 2012 Thomson Reuters Point Carbon survey, carbon market participants are forming an increasingly pessimistic view regarding the European Union Emissions Trading System (EU ETS).

The survey includes views from over 3,000 respondents of which half are involved in carbon trading.

Market participants’ views on prices for European Union Allowances (EUAs) are more bearish now than ever before and less believe the EU ETS is the most efficient way to reduce emissions within the EU.

Information from the survey shows that the average for the minimum price at which respondents would be willing to sell EUAs in 2012 is €12/tonne ($16/tonne), a reduction of 33% from last year’s value of €18/tonne and the lowest figure since 2008. Similarly, the average for the maximum price at which participants would buy EUAs is €8/tonne, a 38% drop from last year’s value of €13/tonne and once again the lowest since 2008.

In a Point Carbon media briefing, Carina Heimdal, editor of crediting mechanisms and emerging carbon markets said: “The low carbon prices reflect the fact that no additional reduction is needed to meet the EU reduction targets for 2020.”

In this year’s survey, 41% of participants said they will have surplus EUAs – accumulated from phase two (2008–2012) – to sell in 2012. This compares to only 29% the previous year.

On the back of this, there has been a growing call for market intervention in the form of a ‘set-aside’ scheme – a temporary reduction in allowance allocations, which would be brought to market at a later date.

However, Anders Nordeng, senior analyst at Thomson Reuters Point Carbon, says that the prospects of such a scheme are “highly uncertain”. “The earliest that we predict member states will agree to a set-aside proposal would be late 2013,” says Nordeng. If a set-aside scheme were to be implemented, Nordeng says the amount of reduction in allowances would not be the 1.4 billion figure sought by the Green Group in the European Parliament but closer to 700 million to 800 million allowances.

In such a scenario, Point Carbon forecasts EUA prices to rise by €2–4/tonne above its current forecast of a phase-three (2013–2020) average of €12/tonne. However, even with prices at €16/tonne, survey results shows a set-aside would have minimal impact on emitters’ activities. Survey participants said they would only seek to reduce their emissions and start to sell EUAs if prices rose to €29/tonne.

Prices for Ice European Climate Exchange (ECX) EUA futures closed on 28 March at €7.18/tonne.


This article was first published on Risk

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