EU carbon prices are estimated to rise by 10% in the second quarter of 2014

EU carbon prices are estimated to rise around 10 per cent in the second quarter of 2014 and then a further 10 per cent in the second half, as the European Union cuts the number of emission permits.

The current market price of a EUA is around 6.35 euros/tonne and the price is expected to be 6.95 euros a tonne on average in the second quarter of 2014 and 7.55 euros in the second half.

Monday marks the start of regular reduced carbon permit auctions in the EU Emissions Trading System (ETS) under the bloc’s so-called backloading plan, which will withhold 900 million units from government auctions between 2014 and 2016 in a bid to lift prices. Sale volumes are being cut by 400 million units or around 45 per cent this year, 300 million next year and 200 million in 2016.

The analysts predicted average prices will continue to rise to 8.40 euros in 2015 and 9.45 euros in 2016. In 2017, they forecast, average EUA prices will finally reach double digits.

There are two main factors which drive prices up, according to Matteo Mazzoni, an analyst with Italy-based Nomisma Energia. “Additional demand may come from some industrial manufacturers that are now more worried about possible future shortages, and a lack of supply may result from those companies changing their strategy to hold surplus inventory instead of selling it,” he said.

Industrial companies made billions of euros from selling excess allowances awarded during the second phase of the EU ETS (2008-2012), but those firms are forecast to be facing a net deficit in the third phase (2013-2020).

 

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