The operation was a complete success; the patient died. Who thought we’d see a need for that joke again in relation to the EU, so soon after Cyprus? This time it’s the carbon emissions trading scheme, or EU ETS, and the consensus is it’s been dealt a near-mortal blow by a vote in the European parliament. Read more
The EU carbon market has been miserable for most of the past few years, with prices staggering downwards from their c.€30 levels on the scheme’s launch in 2005. But it’s become very gloomy in the past couple of weeks, with mid single digits prices falling as much as 40 per cent to a record low of €2.81 last Thursday. Read more
A global climate deal to extend the life of the Kyoto treaty and establish the parameters for negotiating a new pact by 2015 will provide a fresh stimulus to the world’s floundering carbon markets, according to bankers and analysts, reports the FT. Carbon prices have plunged to record lows in recent weeks as Europe’s emissions trading scheme, the world’s largest, has been hit by eurozone uncertainties and fears of an oversupply of carbon credits. Other carbon market analysts welcomed the salvaging of the Kyoto treaty, noting that some countries in Durban had threatened to try to kill off the carbon offset market created under the treaty if the conference rejected its extension. Negotiators agreed to new market mechanisms to put a price on carbon, though many details were left undecided, and it is far from certain the agreement to agree will amount to anything, explains the Guardian.
British Airways faces a bill of nearly €50m, the highest of any airline, when carriers around the world are brought into the European Union’s carbon emissions trading scheme next year, the FT reports. But BA and other large European carriers will face a relatively smaller burden than their rivals in the US and China, because they should get an average of 81 per cent of the carbon allowances needed under the scheme for free. The Chinese and American carriers will only get an average of up to 64 per cent, according to estimates in a report by Thomson Reuters Point Carbon using data from RDC Aviation. The airline industry’s total bill is expected to be €1.1bn ($1.5bn) at today’s carbon prices, the study says. The whole sector may only make a $4bn profit this year, the International Air Transport Association has forecast. The €50m bill BA faces amounts to €1.66 per passenger, much more than the €0.14 expected for Delta, its US rival on the lucrative London-New York route. US airlines have taken legal action against the EU’s move to make airlines flying into and out of the bloc pay for pollution, and Chinese complaints have prompted warnings of a trade war from European aircraft-maker Airbus.
There are three important industrial scenarios for Europe’s carbon allowance market – or EUA – investors across the spectrum should be aware of:
1) A rising industrial output scenario — good for the economy; not so much industrial players short of carbon credit. Nonetheless, the ideal framework for the programme. Read more