Prices drop after analysts predict 2013 verified CO2 data fall

25 March 2014 16:16 Source:ICIS

Verified emissions over 2013 in the EU emissions trading system (ETS) are expected to be less than the year before, according to analyst forecasts. The news pushed down EU allowance (EUA) prices on Monday, and could exert further bearish pressure.

Several carbon analysts predict lower 2013 figures, when compared to 2012 emissions.

Carbon analysts Thomson Reuters Point Carbon estimate that 2013 emissions will be 1.91bn tonnes of CO2 equivalent (tCO2e), a 4% drop year-on-year.

Analysts Bloomberg New Energy Finance suggest a smaller 3% drop to 1.81bn tCO2e.

ICIS-owned analysts Tschach Solutions expect a marginal increase in verified emissions to 1.91bn tCO2e in 2013, from 1.87bn tCO2e in 2012.

“There is uncertainty around the newly included sectors”, Ruf added, which he said could push up the figures.

Sectors such as aluminium production and gases including perfluorocarbons were lumped into the EU ETS from compliance year 2013.

If market participants have overestimated the quantity of 2013 emissions, then any lower-than-expected result could add bearish pressure to prices, said Philipp Ruf, senior analyst at Tschach Solutions, on Tuesday.

EUA prices dropped in Monday’s session as a result of reports of lower than expected verification figures.

The benchmark contract has been on a downward slide since early March. The product was assessed at €6.0/tCO2e on Monday, down from €7.0/tCO2e on 7 March.

The December ’14 contract’s lowest support level is at €5.16/tCO2e, brokers Vertis said in a blog post on Monday.

Traders last week predicted that disappointing 2013 verification figures could encourage prices to fall below €5/tCO2e ( see EDCM 20 March 2014 ).

Verified emissions in 2013 could be lower because of a weak EU economy, increasing share of renewables in power generation and a mild winter, market participants said.

The European Commission will publish verified 2013 emissions data on 1 April at 12:00 Brussels time.

On 2 May, also at midday, the commission will release information on the number of allowances surrendered to cover the verified emissions before a final announcement on 15 May detailing whether installations met their compliance requirements. Ben Lee

By Ben Lee