Tag Archives: carbon-markets
EU Carbon Price Rebounds
AAP 13/06/13 Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market. The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS). The EU parliament in April voted against a plan to temporarily “backload”, or remove, 900 million permits from its market in a bid to double its carbon price. The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015. But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan. The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2. Energy and carbon advisory firm RepuTex said although not set in stone, bipartisan support for this proposal was unprecedented and spelled good news for Europe’s ETS. “Prices don’t spike 70 per cent in one day unless there’s good news,” RepuTex executive director Hugh Grossman told AAP. If the vote is successful it would have immediate implications for Australia, even though it’s not anticipated the local market will mirror exactly what’s going on in Europe. RepuTex expects Australia’s carbon price to reach $5 in 2015 when the schemes link, well short of the revised down $12.10 forecast in the May budget. But by 2020 they predict it could climb to $30 per tonne, closer but still under Treasury’s estimate of $38. “Previously the government was a fair way off (with estimates), and certainly we still think it’s being optimistic,” Mr Grossman said. “But backloading really does support their claims a lot better.” However he warned against being too optimistic, as the price spike was similar to that experienced in the weeks leading up to the last failed vote. After that fell over, RepuTex predicted Australia’s carbon price – currently fixed at $23 and set to rise over the next two years – would likely fetch an average $2.70 between 2015 and 2020. Continue reading
Global Carbon Trading System Needs Urgent Support Warns UN chair
7 June 2013, 1:27 pm By Ed King The world’s main system of carbon trading needs urgent support from governments if it is to continue functioning effectively and give developing countries access to green technologies. The UN’s Clean Development Mechanism (CDM) has 6900 registered projects in 86 countries, and has issued 1.3 billion certified emission reductions (CERs) since its launch. One CER is the equivalent to a tonne of carbon dioxide. But falling demand for these credits and a lack of policy clarity from governments has left the CDM struggling, with prices dropping by 90%. CDM Executive Board chair Peer Stiansen told a meeting at the UN climate talks in Bonn he was happy with the integrity of the mechanism, but said the global economic outlook and struggling EU emissions trading system indicated there would be no quick fix. “We have proved we can deliver on scale, and that is an important achievement, because we need scalability for this mechanism,” he said. “But currently we are seeing low demand in CERs, which rests in low prices and lack of incentives. It is very frustrating, and we’re seeing the market cannot continue for project developers, and many are leaving.” CDM projects aim to develop low carbon solutions in developing part of the world (Photo: Curt Carnemark/World Bank) Last September a panel set up to assess the health of the CDM warned that allowing it to fail would make it harder to raise finance in the future to help developing countries cut carbon. Joan MacNaughton, vice chair of the high level panel and a former UK civil servant, told the Guardian : “The carbon market is profoundly weak, and the CDM has essentially collapsed. It’s extremely worrying that governments are not taking this seriously.” New restrictions on what types of projects would be accepted by the CDM were introduced at the end of 2012, leading to a spike in applications before that came into effect. Since then Stiansen says they have fallen to around 20 a month. It’s a substantial drop compared to previous years, and the chairman suggested it was indicative of the current uncertainty in the markets over the global desire to pursue a low carbon agenda. “We hope this will be a temporary dip and that countries will move and make decisions to create more demand,” he said. “In 2014 there is a provisional step-up of ambition on the Kyoto Protocol, and positive movements in the ADP [talks on a global emissions deal in 2015] would hopefully raise expectations and raise more demand.” The UN is taking steps to simplify what critics say has become a complicated and lengthy application process. Stiansen said the initial registration and review process on new submissions will be streamlined to just over two weeks. The CDM has also opened three offices in Africa, with a fourth planned in the Carribbean, to promote applications from those regions. “What we have to offer is our moral support. The ones who can take action would be the parties – such as voluntary cancelation of CERs,” he said. “It is limited what the board can do. I want to re-emphasise this is a problem of demand – I do not see this as a problem of supply.” Stiansen’s bleak forecast is shared by analysts, some of whom fear continued lack of demand could hit investment in green development projects in poorer parts of the world. Anja Kollmuss from Carbon Market Watch told RTCC the CDM board has to tighten its application process to ensure projects are environmentally acceptable, but admits that unless governments took steps to drive demand the short-term outlook is bleak. One hope is that a possible aviation emissions agreement could boost demand for CERs. Earlier this week the world’s leading airlines called on governments to agree to a new greenhouse gas offsetting scheme for the aviation industry. “What may happen is that if ICAO [international aviation body] comes to an aviation agreement and they do agree on a market-based mechanism there might be an increase in demand from aviation – but this wouldn’t start till 2020. “I’m not too optimistic that anything will change anytime soon in terms of prices in the CDM” Continue reading
Worry Over Scarcer Credits Propels US Carbon Market RGGI
http://www.ft.com/cms/s/0/25cf4754-cfb6-11e2-a050-00144feab7de.html#ixzz2VuVXa62r June 9, 2013 11:52 pm Worry over scarcer credits propels US carbon market RGGI By Gregory Meyer in New York and Pilita Clark in London A pioneer US carbon market is climbing after an intervention meant to grapple with a surplus of credits that has also dogged Europe’s emissions trading system. Last week’s quarterly auction by the Regional Greenhouse Gas Initiative, operated by nine northeast states, was twice oversubscribed. The clearing price of $3.21 per short tonne was the highest in four years. Companies on a list of potential bidders included energy traders EDF Trading, Koch, Mercuria and Vitol as well as Morgan Stanley, the Wall Street bank. The programme began in 2009 as a means to reduce emissions in states including Massachusetts, Maryland and New York. Power plants of 25 megawatts or larger must purchase a permit for each short tonne of carbon dioxide produced. But prices plunged as financial crisis damped electricity demand and a shale drilling boom encouraged generators to burn natural gas instead of higher-carbon coal. In February, the states cut the cap on annual emissions by 45 per cent to 91m short tonnes from next year, with 2.5 annual reductions afterward through 2020. Paul Tesoriero, director of environmental markets at Evolution Markets, a New York broker, said anticipation of scarcer credits had lifted prices. “It has everything to do with the rule change,” he said. The policy shift boosted futures markets pegged to credits. RGGI volume at the ICE Futures US exchange more than quadrupled on the year to 4,285 contracts in May. Still, a stockpile of about 100m credits has been banked by traders. This will weigh on prices for years to come, Mr Tesoriero said. In the European Union’s eight-year-old emissions trading system, the largest carbon market in the world, benchmark prices have collapsed to less than €4 a metric tonne, down from more than €30 five years ago, as the weak EU economy exacerbates a glut in the supply of credits. A surplus of about 2bn permits, or roughly a year’s worth of emissions, has built up in the scheme. That is because of weak EU economic conditions – which reduce industrial activity, and therefore demand for permits – and because the EU gave away too many permits for free when the scheme started. The European Commission, the EU’s executive arm, has been trying to approve a plan that would temporarily take 900m tonnes of permits out of the market, and put them back in later when it was hoped demand might be stronger. The measure, known as “backloading”, was rejected by the European Parliament by 334-315 votes in April after business group lobbyists said it would erode EU competitiveness, sending prices down to less than €3. Prices have recovered slightly since then as the parliament prepares for another vote on July 2. “There is some optimism in the market that it could make it through parliament this time, which is definitely pushing prices up,” said carbon analyst Marcus Ferdinand of Thomson Reuters Point Carbon. Even if the backloading plan does pass, however, many analysts believe it will only push prices up by around €2 from what they would have been otherwise. Continue reading
