The first wave of trading in EU carbon allowances (EUAs) for the next phase of the scheme starting in 2013 is expected to take off within the next few months, in a sign that many participants in the market remain confident in its long term prospects.
The EU emissions trading scheme (ETS) has been heavily criticised in recent months after falling industrial output led to reduced demand for carbon allowances. Consequently, the price of carbon allowances has collapsed from a high of around €30 last summer to less than €10 earlier this year, before recovering slightly to its current price of €12.50.
However, Chris Leeds, a director in Barclays Capital's carbon trading team, insisted that despite tough trading conditions there were signs of long term confidence in the market. Most notably, in the form of early indications that firms are already preparing to buy EUAs for use in the next phase of the scheme, which starts in 2013 and will impose tighter carbon caps on heavy emitters.
He said that there had already been small volumes of futures trades in EUAs for use in the post 2013 phase and predicted that the trend will increase in the coming months.
"We expect to see trading in post 2013 credits and that will give people real confidence in the market," he said, adding that recent indications from EU legislators that they are not going to intervene in the market to bolster low prices had also given firms confidence to start planning how they will comply with tighter caps through the post 2013 phase. "The EU saying they are not going to meddle will give people more confidence to invest in low carbon technology" he said.
Leeds said that allowing firms to transfer unused EUAs into the next phase of the scheme had also ensured that the price of carbon had not collapsed completely despite plummeting emissions from industries such as concrete and steel.
"If you couldn't bank EUAs for the next phase, the price would be much lower now, but people now that they can roll them over and that they will need them post 2013 when the caps are tighter, so they are holding on to them" he said. " The market is actually working a lot better than people realise and will be even better after 2013."
Research note says price of EUAs will rise 10 per cent during 2010 as industrial firms hedge bets ahead of phase three 08 Jan 2010
Latest analysis predicts recession will result in oversupply of allowances during current phase of EU emissions trading scheme 17 Apr 2009
Report predicts that recession, coupled with failure to deliver a strong deal at Copenhagen, will result in a lower-than-expected carbon price 03 Nov 2009
As government completes its latest auction of carbon credits, analyst warns recovery in prices could prove short-lived 04 Jun 2009Report argues hybrid carbon tax-and-trade model would give low-carbon investors certainty they crave 23 Mar 2009
Desert tortoise fears allayed? 19 Mar 2010
Cameron presents pre-election energy policy, promising greater investment certainty for low-carbon projects, green loans for households, and streamlining of planning system 19 Mar 2010Joint statement from carbon exchange and Hungarian government aims to restore confidence in CER market 19 Mar 2010
More news
From climate change contrarians to the "KitKatastrophe" of Nestle's palm oil policy, we look at the best the green web has to offer this week 19 Mar 2010
"It needs the political enthusiasm that was behind the war on terror after 9/11" 19 Mar 2010
From the government's plans for a marine energy revolution to John Lewis' proposals for an off-grid supermarket 19 Mar 2010 More in-depth
Post your comment
Send an email to the Business Green editor at feedback@businessgreen.com
