EU Carbon Market Still Oversupplied Despite Economic Recovery

LONDON, April 1, 2011 /PRNewswire/ -- The EU emissions trading system (EU ETS) is still oversupplied, despite emissions rising for the first time since the recession started, fresh data shows.

Companies under the EU ETS pumped out 1,757m tonnes of CO2 in 2010, up around 3% from 2009 but still lower than the total supply of allowances, created by the EU for that year.

The oversupply would have triggered a price crash towards zero if it wasn't for the fact that companies can bank allowances into a later trading phase, starting in 2013.

The data from the European Commission is still preliminary, but only a few plants have not yet submitted their emission reports, indicating the final figure should be similar.

ICIS Heren data shows that EUAs - the traded instrument in the EU ETS - remains at just half the prices they hit in 2008, before the recession struck. EUAs with delivery in December 2011 - the benchmark contract - have closed on average at EUR16.50/tonne of CO2 in March, compared with prices above EUR30.00/tonne of CO2 in mid-2008. "The carbon market was stable on Friday after the data release, showing that companies have already factored in a rise in emissions into prices," Isabel Save, editor of European Daily Carbon Markets, said.

The surplus of EUAs is not evenly distributed across countries and sectors, however. Power producers in the UK were short of 35m EUAs in 2010, while the German power sector faced a shortfall that was double as big. In contrast, steel and cement makers in Europe had 125m EUAs to spare, compared with their free allocation.

Notes for editors

Launched in 2005, the EU ETS works on the cap and trade principle. This means there is a cap, or limit, on the total amount of greenhouse gases that can be emitted by the industrial and power plants in the system. Within this cap, companies receive emission allowances (EUAs) which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value.

At the end of each year each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.

The number of allowances is reduced over time so that total emissions fall. In 2020 emissions will be 21% lower than in 2005.

ICIS Heren is an information service provider for gas, liquefied natural gas, power, carbon and coal market intelligence. We publish a suite of tailored reports providing news, analysis, benchmark price assessments and indices. Through our reports we aim to bring liquidity and transparency to power and gas hubs, helping you analyse the sector and make informed business decisions.

For more information visit http://www.icis.com/heren Request your free sample report and find out more about ICIS Heren's carbon market coverage. Copy this link into your browser. http://bit.ly/g09Ynw

Reed Business Information

ICIS Heren is part of Reed Business Information, http://www.reedbusiness.co.uk, (RBI), a division of Reed Business and a member of Reed Elsevier plc (525), (UK:REL) (US:RUK) (NL:45443) the world's leading publisher and information provider.

RBI publishes more than 100 market leading publications, directories and online services, and organises many industry conferences and awards. The RBI portfolio includes Banker's Almanac, Computer Weekly, Farmers Weekly, Flight International, ICIS, Kellysearch, New Scientist, Personnel Today, Totaljobs and XpertHR. For a full listing visit http://www.reedbusiness.co.uk

    For further information please contact:

    Isabel Save
    ICIS Heren
    t: +44(0)20-7911-1942
    e: [email protected]

    http://www.icis.com/heren

SOURCE ICIS Heren

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