Carbon Trading Price Rise Predicted

Phase 3 of the European Union’s Emissions Trading Scheme (EU ETS) could see the price of an EU Allowance (EUA) rise from €30/tonne in 2013 to €40/tonne in 2016, according to market intelligence firm Point Carbon.

Such an increase, from current levels of around €15/tonne, is vital in order to meet the EU’s current emission reduction targets of 20% below 1990 levels and any possible increased reduction targets that may be discussed at the UN’s Copenhagen summit this December, Point Carbon believes.

These predictions, which appear in Point Carbon’s most recent Carbon Market Brief, entitled ‘EU ETS scenarios to 2020,’ depend on political developments and alter depending on several emissions scenarios.

Point Carbon highlights the three likely scenarios as being the EU-20 scenario, whereby the EU does not increase its current emissions reduction target, the EU-30 scenario, where the EU’s current reduction target is increased to 30% below 1990 levels and the ETS linking scenario, in which the EU ETS establishes a full link to a US ETS and other ETS schemes before 2018.

The EU-20 scenario would lead to a price range of €25-€50/tonne by 2016, the EU-30 scenario would lead to price range of €35-€65/tonne by 2016 and the final scenario would lead to a price range of €10-€30/tonne by 2016, significantly lower than the other two scenarios due to new and expanded crediting mechanisms and a large import limit, the company says.

Karl Magnus Maribu, author of the report, comments: “Over the last half year emissions projections have been dramatically reduced following the economic downturn resulting in lower emissions and a surplus of EUAs and Certified Emission Reductions (CERs) in phase 2 that can be banked into phase 3. At the same time, the US has become an active and constructive participant in the international climate negotiations and a climate agreement seems within reach. Therefore it is now more likely that the EU will adopt a 30% reduction target. Furthermore, cap – and – trade schemes in the US and in other regions have become more likely, potentially linking up with the EU ETS.”

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