Carbon 2009 Emission trading coming home - UNEP Finance Initiative

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17 March 2009 Figure 3.5: Should I buy, sell, bank or reduce emissions? Companies with emissions covered by the EU ETS. N=285 (2009). 40% 35% 30% 25% 20% I/we would buy EUAs today at a minimum price of 2008 2009 Average 2008: €18 Average 2009: €11 35% 30% 25% 20% I/we would sell EUAs today at a minimum price of € 2008 2009 Average 2008: €28 Average 2009: €17 15% 15% 10% 10% 5% 5% 0% 0% 0-10 10-15 15-20 20-25 25-30 30-35 35-50 50- 100 >100 0-10 10-15 15-20 20-25 25-30 30-35 35-50 50-100 >100 25% 20% 15% I/we would bank any surplus EUAs at prices below € 2008 2009 Average 2008: €22 Average 2009: €15 25% 20% 15% We would seek to reduce our own emissions and start to sell EUAs if the EUA price were to stay above € 2008 2009 Average 2008: €44 10% 10% Average 2009: €33 5% 5% 0% 0% 0-10 10-15 15-20 20-25 25-30 30-35 35-50 50-100 >100 0-10 10-15 15-20 20-25 25-30 30-35 35-50 50-100 >100 Source: Point Carbon the EU ETS in phase 2 significantly down. Some analysts, such as Deutsche Bank and Daiwa Securities, have even forecast a surplus of EUAs over the 2008- 12 period. Point Carbon and most other analysts, however, still expect the phase as a whole to be short EUAs, and thus to need a certain volume of CER/ERU imports to be in compliance. The reduction in expected emissions at the company level can be seen in Figure 3.3. This figure shows the distribution of reported short and long positions in the ETS. Most notably, the share of companies reporting that they need to buy EUAs in addition to their full credit limit has fallen from 37 percent last year to 31 percent this year. In the same manner, the share of companies with surplus EUAs to sell has gone up from 15 percent to 24 percent. This situation agrees with the brisk selling of EUAs that we have seen in recent months. Increased share of companies with surplus allowances How are these “shorts” and “longs” distributed by sector? Figure 3.4 gives some answers. The companies that have surplus EUAs to sell are concentrated in the industry sectors other than oil and gas. Companies in the sectors pulp and paper (67 percent), cement, lime and glass (36 percent) and others (38 percent) will likely have surplus EUAs to sell. Some of this surplus likely derives from a contraction in production output in these sectors. Also as expected, the power sector has the greatest number of short companies, with 53 percent needing to buy extra EUAs (whether or not they have surplus CERs). This is also the sector that has the brunt of CERs available for swapping, presumably in large 21 All rights reserved © 2009 Point Carbon
Carbon 2009 part from projects in which power companies are investors. As is well known, the economic downturn has had a negative effect on carbon prices, with the EUA Dec-09 contract having declined from around €30 last summer to around €12 at the time of writing. The lower prices fundamentally show that the slowdown has made it easier for Europe to meet its Kyoto commitments, and also reflect steep declines in oil and other energy commodities. In the same way as last year, our survey asked respondents involved in the EU ETS at what maximum or minimum prices they would buy, sell, bank EUAs or reduce their own emissions. As may be expected, prices indicated are much lower across the board. When asked about the maximum price for buying EUAs, the most frequently selected range was €10-15, compared to €20-25 last year. The same configuration was seen for the minimum EUA sale price (see Figure 3.5). Respondents willing to buy/sell at lower prices When asked at which point companies would bank surplus EUAs rather than selling them in the market, one-fifth of respondents said the price at which they would no longer sell was between €0 and 10. Last year, only one in ten chose this range. Finally, the most frequently cited price at which companies would start reducing their own Share of respondents Figure 3.6: Willingness to buy/sell EUAs at various prices Companies with emissions covered by the EU ETS. N=285 (2009). 100% 80% 60% 40% 20% 0% Source: Point Carbon emissions and sell EUAs moved down from €35-50 to €25-30. While predictable, the movement on these two latter questions clearly indicates that price expectations have been scaled Figure 3.7: Lowering spread expectations Companies involved in trading. The alternative with sCER prices above the EUA was not offered in 2008. N=972. Issued CERs > EUAs € 10 or more € 8-10 € 6-8 € 4-6 € 2-4 € 0-2 Don't know/no opinion Source: Point Carbon down. In principle, banking and abatement should be guided by long-term abatement costs and carbon prices, but the economic downturn has apparently shifted these costs downwards as well. 0% 5% 10% 15% 20% 25% 30% 35% Share of respondents would buy at max 2009 would sell at min 2009 would buy at max 2008 would sell at min 2008 0-10 10-15 15-20 20-25 25-30 30-35 35-50 50-100 above 100 2009 2008 22 All rights reserved © 2009 Point Carbon
Page 1 and 2: Carbon 2009 Emission trading coming
Page 3 and 4: 17 March 2009 Executive Summary The
Page 5 and 6: 17 March 2009 Table of contents 1 I
Page 7 and 8: 17 11 March 2009 2008 Figure 1.1: T
Page 9 and 10: Carbon 2009 Figure 2.2: Still domin
Page 11 and 12: Carbon 2009 The EUA bull run starte
Page 13 and 14: Carbon 2009 power and industry to d
Page 15 and 16: Carbon 2009 Figure 2.10: The EU ETS
Page 17 and 18: Carbon 2009 to October 2008, but we
Page 19 and 20: Carbon 2009 Figure 2.15: A question
Page 21 and 22: Carbon 2009 Delayed and reduced CER
Page 23 and 24: Carbon 2009 by 2020, which could be
Page 25: Carbon 2009 3.2 Impact of the econo
Page 29 and 30: Carbon 2009 surpluses may thus have
Page 31 and 32: Carbon 2009 Delivery risk also appe
Page 33 and 34: Carbon 2009 On the international st
Page 35 and 36: Carbon 2009 Figure 3.19: Grading pr
Page 37 and 38: Carbon 2009 a total breakdown of th
Page 39 and 40: Carbon 2009 enhancement of forest c
Page 41 and 42: Carbon 2009 and limitation or exclu
Page 43 and 44: Carbon 2009 mandatory emission trad
Page 45 and 46: Carbon 2009 Figure 4.13: EUA price
Page 47 and 48: About Point Carbon Providing critic

Carbon 2009 Emission trading coming home - UNEP Finance Initiative

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