Figures on last year’s greenhouse gas emissions brings down prices in allowances trade
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There have been dramatic moments in the Nordic and European markets for trade in allowances for greenhouse gas emissions recently, as prices of emission allowances went down for a second day running.
The decline has been steep, reversing a rising trend that continued until just a few days ago, when the right to emit carbon dioxide rose to about EUR 30 a tonne.
On Thursday, the price of emission allowances hit a low of EUR 15 a tonne on the European Climate Exchange (ECX) in Amsterdam.
Prices were about the same in Nord Pool, where emissions allowances for the Nordic region are traded.
The cause of the decline was that the EU countries have started to give out information on their emissions of carbon dioxide for last year.
Nearly all countries have shown a surplus in emission allowances, which means that they have produced fewer emissions than their quotas would allow them to.
Greenhouse emissions of France, The Netherlands, and the Czech Republic were out about ten percent less last year than their quotas would have permitted.
This surprised markets; knowledge that large amounts of emissions allowances were available pushed prices down.
It is difficult to pinpoint a cause for the surplus in emission rights. Harri Roto of GreenStream Network, which brokers emission allowances, says that either allowances have been distributed more freely than expected, or then companies really have started to limit their emissions.
If the latter is true, it would be an indication that the emission allowance system is working as it is supposed to.
Of the countries that have released their figures so far, only Spain showed a negative balance, putting out more greenhouse gases than it is entitled to. Roto says that this was caused by the very dry summer last year, which reduced the amount of hydroelectric power available, forcing Spain to burn more fossil fuel.
The European Commission is to publish the figures for all EU countries in mid-May. There is considerable anticipation on the market to see the numbers of Germany, which is Europe’s largest source of carbon dioxide emissions. A strong deviation from expectations in either direction in Germany’s numbers could have a powerful impact on the emission trade.
Electricity market prices largely followed the trend set by emission allowance prices.
On Nord Pool, electricity futures for next year fell to about EUR 40 per megawatt hour. Just a few days ago they cost nearly EUR 55.
Esko Kytömäki, CEO of the electricity brokerage company Energiameklarit says that trading on the market has been frenzied, with investors who have engaged in speculation rushing to sell off their holdings, which has led to a downward spiral in prices.
If the lower prices lead to long-term falls in market prices in electricity, it should eventually be reflected in lower consumer prices. However, Kytömäki will not speculate on the future, saying that the phenomenon on the volatile market may be short-lived.
The development was reflected in the share price of the electric company Fortum, which dipped by nearly ten percent on Thursday.
Helsingin Sanomat
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| 28.4.2006 - TODAY |
 Figures on last year’s greenhouse gas emissions brings down prices in allowances trade
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