Tag Archives: carbon-markets
Europe Acts to Fix Its Crippled Carbon Market
SustainableBusiness.com News After months of wrangling, a vote in the European Parliament is bringing relief to the EU’s stricken Emissions Trading System (ETS), the world’s first and largest cap-and-trade program. The vote shows the political will to address the oversupply of allowances (permits to emit carbon) that has led to unsustainably low carbon prices. On July 2, Members of the European Parliament (MEPs) voted in favor of a “backloading” proposal which would withhold hundreds of million of permits. Pulling back available permits to balance supply and demand (in order to raise prices) is exactly what’s been needed, but a previous vote caved to industry interests, which convinced them that higher carbon prices risked the bloc’s competitiveness. That move collapsed carbon prices by another 45%, to €2.63 ($3.38) per ton of carbon dioxide, and led many to question whether Europe remains committed to the program – its flagship climate change policy. However, that price collapse triggered intense debate and a renewed effort to save the market. “This is a good decision by the European Parliament and is an important step forward for climate change policy,” says Ed Davey, the UK’s climate change minister. “We need a stable carbon market so we get more certainty for investors so emissions reductions can be achieved at the lowest cost possible.” Carbon allowances have lost 75% of their value over the last four years as Europe’s economic downturn, and the faster-than-expected development of renewable energy capacity has reduced demand for allowances from emitters. As the world’s first market, it did not have rules that would come into play when demand drops. The lack of the ability to reduce the supply of allowances led to a glut. Last year, the European Commission proposed to ‘backload’ 900 million allowances, holding them back until later in the decade. This would push prices up, giving time for structural reforms to the system to be introduced. “This is a reassuring signal for industry and international observers – many of whom have recently adopted their own emissions trading schemes – that the EU remains committed to decarbonizing Europe’s economy in the most cost-efficient way,” says Hans ten Berg, the Secretary General of Eurelectric, which represents Europe’s electricity sector. “Today’s positive vote is a much needed step in the right direction, but it is nevertheless only a first step. We urge the Commission to continue down this path of strengthening the ETS in the long run by proposing more significant structural reforms.” The backloading proposal still needs to clear several more hurdles, although analysts say last week’s vote was the toughest. Traders expect the Commission to begin withholding allowances next year. Structural reforms, however, are likely to be years off, given the drawn-out processes involved in European policy making. Elections next year to the European Parliament are likely to slow deliberations, and most observers don’t expect reforms to be agreed until 2017. But last week’s vote shows there is political will to fix Europe’s carbon market, say participants. “The ‘yes’ vote should provide a short-term boost to carbon prices and confirms the EU’s commitment to the success of the ETS and to implementing the long-term improvements that are still needed,” says Thomas Rassmuson, a Founding Partner at CF Partners, a risk advisory and investment firm specializing in renewables and commodities. Continue reading
EU To Temporarily Curb Oversupply Of Emission Allowances
Monday, 8 July 2013, 10:47 am Press Release: UN News UN Chief Praises EU Proposal to Temporarily Curb Oversupply of Emission Allowances New York, Jul 5 2013 – Secretary-General Ban Ki-moon today welcomed a move by the European Parliament to support the proposal to backload permits from the European Union’s carbon market. “The vote sends a clear signal that the European Union remains committed to carbon pricing,” the Secretary-General’s spokesperson said in a statement. On 3 July, EU politicians in Strasbourg voted 344-311 in favour of temporarily removing a maximum of 900 million permits, out a total surplus of around 1.7 billion, from trade. The move is meant to drive up carbon prices which have been at a record low. According to today’s statement, Mr. Ban’s spokesperson said the UN chief hopes more structural reforms will now follow in order to strengthen the EU’s carbon market “as a driver for innovation and energy efficient solutions.” The Secretary-General added that the EU’s carbon market is an inspiration to the development of similar markets in China, Australia, South Korea and the United States. “Europe must continue its fight against climate change,” Mr. Ban said. “An effective and well-functioning carbon market is a key tool to reduce greenhouse gas emissions cost-effectively.” Ensuring environmental sustainability is one of the eight anti-poverty targets known as the Millennium Development Goals (MDGs) with a deadline of 2015. In addition, the UN is now working with partners on a post-2015 sustainable development that will build on the progress made by the MDGs. For more details go to UN News Centre at http://www.un.org/news ENDS Continue reading
UPDATE 3-Carbon Wins Lifeline After Tight EU Parliament Vote
Wed Jul 3, 2013 * Carbon price jumps as much as 13 percent * Close 344-311 vote follows months of wrangling * Will need member state backing to become law * German economy ministry says still against the plan (Adds comment, updates prices) By Michael Szabo, Nina Chestney and Andrew Allan STRASBOURG/LONDON, July 3 (Reuters) – The European Parliament after months of bitter debate backed a plan on Wednesday to boost carbon prices, throwing a lifeline to the EU Emissions Trading System (ETS) and the bloc’s push for greener energy. EU politicians in Strasbourg voted 344-311 in favour of temporarily removing up to 900 million permits from trade , tackling oversupply that has sent carbon prices to record lows. The plan will now require backing from a majority of EU countries to become law. “A lot of member states are coming out in favour …We need to see what the formal vote is. Realistically, it will not be until after the German elections (in September),” EU climate chief Connie Hedegaard told Reuters. The ETS is a cornerstone of European Union climate policy, but a much higher carbon price is needed to achieve its goal of spurring industry to invest in low-carbon energy. EU politicians voted against a plan put forward last month but agreed to allow a one-off intervention in the market to temporarily withdraw up to 900 million permits. Companies and utilities buy these to cover their excessive carbon emissions output. “The ‘yes’ vote should provide a short-term boost to carbon prices and confirms the EU’s commitment to the success of the ETS and to implementing the long-term improvements that are still needed,” said Thomas Rassmuson, founding partner at CF Partners, an investment firm specialising in renewable energy. TEMPORARY BOOST? EU carbon prices were down ahead of the vote but traders took the outcome as a signal to buy, with prices jumping as much as 13 percent to 4.86 euros a tonne in afternoon trade. Shares in Germany utility E.ON briefly turned positive after the vote before falling back on a lower benchmark DAX index. RWE shares were down 0.9 percent. Analysts have estimated that EU carbon prices could average 8 to 9 euros over the next eight years, almost double current levels, if the plan to temporarily remove permits is implemented. Ultimately, they say carbon prices must reach levels of 40 to 50 euros to drive investment in lower carbon energy, something governments are keen to see happen to help them reach environmental targets. Poland opposes efforts to bolster carbon prices, however, as its economy still relies heavily on carbon-intensive coal . Germany has failed to take a formal position as the economy ministry opposes it on concerns it will hurt competitiveness, while the environment ministry supports the plan. “Today’s decision is regrettable. The economy ministry’s criticism remains unchanged,” a ministry spokesman said. Other opponents include energy-intensive industries loath to pay higher energy costs, free trade advocates against intervening in markets, and some who argue temporary removal of permits will not raise carbon prices to meaningful levels. Some energy companies have strongly supported the permit removal plan. Finnish utility Fortum said it marked a step toward needed, deeper reform. “A more profound renovation of emissions trading is necessary,” Fortum Chief Financial Officer Markus Rauramo said, noting the market would benefit from the setting of 2030 EU emissions reduction targets. (Additional reporting by Christoph Steitz, Barbara Lewis, Nerijus Adomaitis, Michel Rose, and Sarah Marsh; editing by Jason Neely) Continue reading
