CO2 emission allowances hit record low

Declining industrial demand reduced the price of CO2 emission allowances to record lows of 8.05€ on 12 February 2009, raising fears that the global economic crisis could undermine the EU’s carbon market. Significant price drops have left some companies with surplus allowances. Point Carbon says that the market has shrunk by a third since last November, and estimates that the value of allowances traded has fallen by 38%, from €322 million a day in November to €208 million in January. The Director of Global Carbon Research at Deutsche Bank has proposed to establish a reserve price for EU emissions allowances to avoid a price collapse in the third phase of the EU’s ETSⁱ, which starts in 2013.

The European Environment Agency (EEA) says that the first trading period from 1 January 2005 to 31 December 2007 can be seen as an exploratory phase, taking into account that the EU ETS is the first multinational emissions trading scheme of this magnitude (see December – January Eurobrief). The Agency says that a number of lessons have been learned, and that there is still room for further alignments.

The EEA report is available here:http://reports.eea.europa.eu/technical_report_2008_13/en