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The EU Emissions Trading Scheme (EU ETS) delivered a shortage of emissions permits compared to emissions for the first time last year, despite a savage economic downturn that hit industrial production in the second half of the year.
Although final figures are not yet available, Europe probably saw greenhouse emissions from heavy industry and power plants fall around 4 per cent in 2008. Lower emissions due to the downturn is clearly a major factor in the fall. But the fact there were still fewer EUA allowances on issue compared to recession-level emissions will be welcomed by the European Commission, a critical ingredient required for the success of the EU carbon market that had been lacking in the initial phase of the scheme up to 2007.
The EC said 1.98 billion tonnes of carbon dioxide emissions had been reported by firms in the EU ETS, although this represented only 85 per cent of covered emitters across the 27-nation EU. Analysts scrutinising the incomplete figures and comparing on a like-for-like basis with 2007 confirmed firms had emitted more than their quota last year. Their estimates of the 2008 fall in total emissions range from -3 to -6 per cent.
“This data is in line with our expectations, a 4.3 percent reduction in emissions year-on-year and a short position of 40 million tonnes for the year,” Barclays Capital analyst Trevor Sikorski told Reuters. He said it was likely the total picture was 2.15 billion tonnes of emissions versus a cap of 2.11 billion. Societe Generale analyst Emmanuel Fages estimated the shortage of emissions permits was about 100 million tonnes for the year.
A fall in emissions in this range was expected by the market. Confirmation of the shortage of permits, however, did lift prices. The benchmark Dec 09 EUA futures contract rose nearly half a euro to close at
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