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EU 2020 oversupply forecast exceeds analyst expectations

09 Oct 2013 18:01:20 | edcm

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The EU expects accumulated oversupply in the carbon market to increase by a quarter to 2.5bn allowances in 2020, with prices doubling from current levels, according to a source with access to EU draft documents on Tuesday.

The figures – included in the new reference scenario 2013 – have been used as benchmarks for an impact assessment of the 2030 framework for climate and energy policies.

The European Commission calculated that oversupply in the EU emissions trading system (ETS) stood at 2bn EU allowances (EUAs) at the start of phase III.

In March the commission launched a public consultation on what type of targets and what levels should be set for 2030.

The commission now plans to table the framework by the end of the year. EU leaders are expected to discuss it at the spring summit in March 2014, according to the time frame the EU executive provided.

The expected oversupply figure takes into account “full implementation of current policies”, even if it does not specify whether this refers to policies such as back-loading/possible structural reform of the carbon market or simply to achieving the targets outlined in the 20-20-20 package. This refers to a 20% reduction in greenhouse gas emissions from 1990 levels, bringing the share of EU energy consumption to 20% and a 20% improvement in energy efficiency.

EUAs are forecast to reach €10/tonne of CO2 equivalent (tCO2e) by 2020, €14/tCO2e by 2025, €35/tCO2e by 2030 and €100/tCO2e by 2050.

Two analysts foresee a 2020 oversupply of 2.1bn allowances, 400m lower than the EU.

Consultancy Nomisma’s carbon analyst Matteo Mazzoni expects prices at €13/tCO2e in 2020, assuming a full implementation of the 20-20-20 package.

ICIS’ analytics firm Tschach Solutions forecasts 2020 prices in three scenarios – depending on the implementation of back-loading and permanent cancellation of allowances – at €8/tCO2e, €9/tCO2e or €24/tCO2e. Silvia Molteni

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