| Sourced From |
The European Commission (EC) says it will not prop up Europes carbon market, despite continued plummeting prices. New lows for emissions permits are primarily linked to the global financial crisis of the past six months. The contraction of European industrial production – and associated carbon dioxide reductions – resulting from the economic downturn and speculation that carbon levels will remain low over the next year has triggered a flood of emissions permits on the market, which has caused prices to drop precipitously.
The EUs Emissions Trading Scheme (EU ETS) allots an annual quota of emissions permits called EU Allowances (EUAs) to electricity generation and heavy industry. If companies happen to emit more carbon dioxide than their allotment, they are forced to purchase more EUAs, typically over carbon exchanges. But with falling demand for EUAs, critics argue that the incentive for industry to cut emissions is lost. The EU ETS is currently the largest multinational emissions trading, or cap-and-trade, system in the world.
Expectations that European industry will remain in a suppressed state in the foreseeable future has many permit holders – in sectors such as power generation and steel making – dumping their 2008 EUAs with the intention of borrowing from their 2009 allotment when their 2008 permits have to be submitted in April. Moreover, poor economic performance has pushed many cash-strapped companies to liquidate assets, including emissions permits.
As EU ETS Phase 2 hits record low, some call for intervention
The abundance of supply and reduction in EUA demand on the European market has pushed prices to a record low for this phase of the trading scheme, which began in January 2008. Alarm bells sounded on 12 February, when prices dipped to
Related posts:
- Europe to leave collapsing carbon prices to market
- Second Phase EUA Prices Bite into Profits of Power Generators
- Global Recession Reaches Carbon Market – EU ETS Shortfall To Drop By 44% Due To Recession, Says IDEAcarbon
- Cheap Carbon: Permit Prices Tank, Threatening Clean-Energy Projects
- EUA Prices Plummet in July