Thursday 24 January 2013

Dismay at low EU carbon price

The record low price of carbon on the EU’s trading system earlier this week has been received with dismay by a British carbon management firm.

On Monday the price fell below 4.8 euros in the early hours of the morning before springing back up to 5 euros later in the afternoon.

The oversupply of permits on the carbon market has been a source of pain for the EU, with the Commission proposing to freeze nearly a billion permits given to large companies for their emissions. Without a stronger price, the aim of cutting emissions in the year 2020 by 20% is significantly undermined.

Energy and carbon management firm Utilyx believes the low carbon price means there might as well be no trading scheme in Europe.

Caroline Pitt, Consulting Director at Utilyx which is owned by FTSE energy services firm MITIE said: “At carbon prices this low there’s limited point in having an EU ETS at all. The Commission needs to decide whether the writing is on the wall for its flagship policy.  Its only option is to step in and reduce the number of allowances available.

“Such a low EU carbon price also calls into question just how serious the EU is about mitigating climate change.”

She claimed the UK’s own carbon price, teamed with low prices, could be bad for business. “The low EU prices mean that UK companies will be paying significantly higher carbon prices than their European competitors and this could well lead to ‘carbon leakage’ as UK businesses move overseas to avoid the additional costs,” added Ms Pitt.

To guarantee a level playing field for all generators and suppliers in the EU, she suggested the Government should work with the EU to improve the EU ETS.