The price of emitting one tonne of CO2 in Europe fell from €30 last Monday to €16.50 on Thursday. This followed news that France, Estonia, the Netherlands, the Czech Republic and the Walloon region of Belgium all had a surplus of carbon credit, pulling down the price.
The carbon trading scheme was launched in Europe in January 2005 to limit total carbon emissions under the Kyoto Protocol.
It is good news for the environment if countries are coming in under target – it means they are emitting less carbon dioxide than predicted.
However, some countries are expected to not have enough carbon credits including Britain, Germany, Spain, Italy and Portugal. These countries have to report by the 15th May.
Will they push the price back up?
You can read more at Reuters, click here.
Jennifer Marohasy BSc PhD is a critical thinker with expertise in the scientific method.
Depending on your position its good and bad news – non emitting energy providers will face stiffer competition as coal fired power generators can now lower unit prices as overheads are reduced. End users will benefit from lower energy prices.
6.4 Gigatons of endogenous carbon emissions. At €30 per tonne say a nice round 20 GigaEuros or 1/3rd of the worlds’ gross product. We are several orders of magnitude away from rational carbon trading prices.
Personally I’m disappointed at the reduction. It will make it harder to scrap the entire process when it is merely outrageous ratrher than its formerly being massively irrational.
Gross World product = 60 trillion US dollars. or about 47 trillion euros. (CIA fact book)
Not sure where 6.4 Gigatons comes from, but using that:
6.4 billion * 30 = 192 billion euros (where did 20 gigaeuros come from?), or 0.4% of gross world product, not 1/3 of gross world product. At 16.50 euros per tonne, its 0.2%.
Giga = 1,000,000,000x (billion)
1000 billion = 1 trillion
For comparison:
This wikipedia entry suggests global tobacco sales are over $100 billion
http://en.wikipedia.org/wiki/Tobacco_industry
Combined worth of world’s top richest 6 people = $195 billion
More good news, see http://www.euractiv.com/en/crashing-carbon-prices-puts-eu-climate-policy-test/article-154873 :
Low carbon prices are bad news for the EU’s climate change policy as the CO2 trading scheme draws its strength from the benefits companies can make from selling their potential surplus pollution allowances on the market. With falling prices, incentives for companies to cut down their emissions and free up extra credits are consequently diminished.
The reported CO2 emissions represent only about 15% of the total emitted in the EU with reports for the biggest emitters like Germany, Italy, Poland and the UK still pending. The Commission will publish full emission statistics for the entire EU on 15 May.
The news took the market by surprise because of the magnitude in the discrepancy between the caps placed on countries’ emissions and the amount of CO2 actually emitted. The shortfall was as much as 25% in Estonia with other countries reporting between 8 and 15% fewer emissions than anticipated. In France, this amounted to 19 million tonnes surplus allocations, authorities said.
Positions: According to Frank Brannvoll, an analyst at Point Carbon, the news has had a snowball effect made worse because market prices were bullish up till then, reaching an all-time high of over EUR30 a tonne of CO2 only days before the reports came out. “Markets are anticipating that the trend will continue,” Brannvoll told EurActiv.
But he indicated the drop also has positive effects, sending electricity prices down as CO2 market valuation is integrated into power prices. Electricity prices already fell by 5 to 10 euros in Europe in general on hearing the news, Brannvoll said.
“There is no doubt that the market is now monitoring what reaction the Commission and the member states will have and whether they will reduce their allocations for the second trading period,” said Brannvoll.
The Commission tried to play down the significance of the price drop saying there was “no crash”. “The market started at EUR6 and nobody then thought it would go above EUR10”, EU environment spokeswoman Barbara Helfferich told EurActiv.
2005 emissions data for the entire EU will be published on 15 May. Helfferich said this would allow the Commission and the member states to base their next round of allocations on reliable data based on “actual emissions”.
There is widespread criticism that EU countries allocated too many pollution credits to industry for the period 2005-2007. This, critics say, gave companies a free ride to pollute since the vast majority of allocations were given away for free by EU governments.
In a recent study, WWF estimated that German power utility Vattenfall Europe received 99 % of its certificates for free. It said other German utilities such as E.ON and RWE had to pay for presumably only 7 % of their emission certificates. WWF calculated that German utilities were set to make windfall profits of between to EUR31 and EUR64 billion until end 2012 due to the free carbon allocations.