The global economic recession will have a significant effect on the European carbon market, nearly halving the shortfall in EU Allowances (EUAs), according to a new projection in the latest weekly report from IDEAcarbon, a leading carbon market analysis and research firm.
In December 2007 IDEAcarbon estimated the Phase II shortfall in EUAs would be 206 million tonnes per year of CO2 equivalent. However, the onset of recession has cut this forecasted shortfall by 44% to 115 million tonnes per year between 2008 and 2012, according to IDEAcarbon’s latest figures.
Alessandro Vitelli, Director of Strategy and Intelligence at IDEAcarbon said: “Our latest forecasts suggest EU industrial output will grow at just 1% in 2008, and shrink by 0.7% in 2009. This will reduce the level of emissions from industry across Europe, and therefore cause a drop in the shortfall of credits available. After 2009 we predict output growth will revert to a positive trend.”
IDEAcarbon estimates that in 2008, total emissions from the EU ETS will come in at around 2.18 billion tonnes, some 98 million tonnes above the cap. In 2009 that shortfall is expected to shrink to 83 million tonnes. Over the five years of EU ETS Phase II, the average annual shortfall will be 115 million tonnes.
“Taking the EU ETS in isolation, the price implications of the recession are already being seen,” the report says. “Industrial companies are busy selling off any surplus EUAs in order to raise short-term cash. EUA prices have fallen from their July 1 peak of
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