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EU ETS emissions up 3.6% to 1,757m tonne in 2010

01 Apr 2011 17:52:35 | edcm

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Plants that hit the 1 April deadline to report 2010 verified emissions data pumped out 1,757m tonnes of carbon dioxide equivalent (tCO2e), pegging the first estimate of the year-on-year rise at 3.6%, in line with analyst forecasts.

This is the first time since the start of the recession in 2008 that emissions have risen year on year. But pollution is still not back to pre-recession levels and the market remains oversupplied compared with the total 1,984m 2010 cap. Carbon traders had expected the move and prices remained stable after the announcement.

Missing data

Most plants in Bulgaria, Cyprus, the Czech Republic, Greece, Malta and Liechtenstein missed the 1 April deadline and are not included in the 1,757m tCO2e figure. Some plants in other countries are also left out.

The like-for-like change in emissions in 2010 was 3.6%, if the 2009 data for these missing plants is subtracted. The main missing countries account for around 10% of total ETS emissions, indicating a slim margin of error for the final 2010 verified data compared with Friday's numbers.

Power sector breakdown

The power plants that hit the deadline increased emissions by an estimated 1.5% year on year (19m tCO2e). This made power the only short sector in 2010.

German power suppliers again faced the biggest shortfall. Their emissions climbed by 5.2%, at the higher end of analyst forecasts, which almost doubled their combined shortfall to 91.4m tCO2e. The UK power sector had the second biggest shortfall, at 35.0m tCO2e, triggered by an emissions rise of 3.5%.

Together, the UK and German power sectors accounted for almost all of the aggregate shortfall in the power sector. Eight other countries also posted a shortfall of EU allowances (EUAs) in the power sector, but the volumes were much smaller. Power sector emissions fell sharply in Spain and Romania, two of the 10 countries with the biggest national allocation plans in Europe.

Spanish power emissions plunged 18% on hydro power stocks that hit a five-year high, record wind power output and a stable nuclear fleet, leaving utilities with a surplus of 2.7m allowances. This is a big shift, as Spanish utilities were short in 2009. Romanian electricity emissions fell 20.3% to create a surplus of 15.8m EUAs for utilities − the biggest among Europe's power sectors.

This suggests that forward hedging of power in the UK and Germany will continue to underpin prices in the carbon market, which is dominated by the power sector. Utilities are now hedging phase III carbon costs, when most of them expect to buy 100% at auction.

Industrial sector breakdown

EUA buyers in the power sector also have access to a large surplus racked by industrial plants despite some sharp emission rises within individual sectors. Overall, industrial plants emitted 172.9m tCO2e less than they were allocated. Emission from the European iron and steel sectors registered the largest increase, climbing 21.2%. Coking and ore roasting and sintering - also part of the steel production process - likewise posted sizable increases in emissions of 17.7-26.6%.

Despite the year-on-year surge, the three subsectors of the metals industry held on to an 81.7m EUA surplus. The only EU-wide industrial sector to post a fall in emissions was refinery, dropping by 2.4%.

Country breakdown

Only five countries handed out fewer EUAs compared with 2010 emissions and were short overall. CO2 pollution rose in all of the top 10 country emitters apart from Romania and Spain (data for Greece and the Czech Republic was unavailable).

In Germany, the emissions rose by 6%, while French, Dutch, UK, Polish and Italian numbers were all contained within a 2-4% range. In percentage terms, the biggest emissions rises happened in Sweden and the Baltic regions, up 20-40% year on year. The countries account for a relatively small portion of overall EU ETS emissions. IS

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