Shaky ETS sees record low price drop

The price of carbon traded within the EU's Emissions Trading Scheme (ETS) fell to record lows yesterday as European Union Allowances (EUAs) dropped below €5 per tonne of CO2.

EUAs have lost 70% of their value since mid-2011 and the price drop adds to the losses seen on Friday after Germany’s carbon auction of 4m EUAs was cancelled by the energy bourse EEX, after the minimum price was not reached.

According to forecasting and advisory firm Thomson Reuters Point Carbon (TRPC), the cancellation of the German auction caused market observers to speculate on how far the carbon price could sink.

However, TRPC senior market analyst Marcus Ferdinand predicted that the decline in prices would not continue.

“Prices often change direction once they reach levels that have caused a rebound in the past. An all-time low is just such a price level that may prompt traders to buy, therefore preventing prices from continuing to sink,” he said.

The European Commission has proposed the temporary withdrawal of carbon permits from the market, known as back-loading, to help support prices, but it has yet to get the backing of all member states, which is required before the plan can become law.

Ferdinand attributed the price drop to a combination of record-low German power prices and an ongoing lack of clarity regarding the back-loading of allowances

“EUA prices are caught in a bearish trend that reflects the general oversupply situation in the market,” he said.

He added: “It is hard to say how deep prices will fall, but round numbers often provide psychological support, so it remains to be seen if the €5/t level can play that role. This will very much depend on the appetite in the upcoming auctions.”

Conor McGlone

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