European carbon market suffers in annus horribilis

Dec 26, 2011 by Anthony Lucas
Activists burn a symbol of carbon dioxide in Berlin. Europe's market in carbon emissions is hoping for outside help after a year in which prices slumped to record lows, savaging claims that trading in CO2 brakes the rise of dangerous greenhouse gases.

Europe's market in carbon emissions is hoping for outside help after a year in which prices slumped to record lows, savaging claims that trading in CO2 brakes the rise of dangerous greenhouse gases.

Launched in 2005 and accounting for 97 percent of commerce, the European Union's (ETS) is the big daddy of initiatives which harness the power of the market against carbon dioxide.

Under it, some 12,000 plants have been given CO2 quotas.

If firms get below their ceiling they can sell the surplus on the ETS. If they are above it, they can meet their quota by buying what they need in the marketplace.

But this carbon-cleanup incentive is falling short of what it was touted to be.

After fluctuating in the past few years between 15 and 25 euros (19.5 and 32.5 dollars) per tonne of CO2, carbon crashed in 2011. Last week, it was changing hands at 6.5 euros (8.45 dollars) a tonne, the lowest on record.

"This market was put together to give a price signal that would spur investment in decarbonising the economy," says Pierre Ducret, head of CDC Climat, a subsidiary in climate market services owned by the French state bank Caisse des Depots.

"But prices today are so low that this tool is just not effective."

Rock-bottom prices for carbon mean that power companies, cement makers and other big emitters see little need to invest long-term in or switch out of fossil fuels.

"Fair prices on CO2 along with price stability over time are imperative for industry to continue along the path to a green growth economy," says Andres Eldrup, chief executive of DONG Energy, a green-energy firm based in Denmark.

The cause of the slump is twofold, say market watchers.

One is rooted in the financial crisis in 2008, which spurred Europe's . Less demand means less activity and less carbon emitted, as well as a softer price for coal, oil and gas.

But another lies in the way the ETS has been managed.

The EU has been criticised for allocating quotas that are too generous for emitters and failing to give a steer on its plans beyond 2020, said Raphael Trotignon, a researcher at the Paris-Dauphine University.

Europe has unilaterally pledged to reduce its annual greenhouse-gas emissions by 20 percent by 2020 compared to 1990, the benchmark year used in the UN climate negotiations.

Sanjeev Kumar, based in Brussels with the green campaign group E3G, says the flood of unneeded trading allowances, combined with carbon credits earned under the UN's clean development mechanism (CDM), amount to a whopping 2.2 billion tonnes.

"It's really, really big. That's the source of the problem," he said.

"The first thing we have to do is to intervene on the market. If it carries on like this, by very early 2012 the price could drop to as low as one or two euros, which would render it almost pointless."

What can be done to shore up the carbon price?

CDC Climat argues for a floor of 17 euros per tonne from 2013 for quotas that will be sold by states.

Another possibility would be for the EU to deepen its unilateral cut, from 20 percent to 30 percent, in 2020 emissions compared to 1990.

But right now this is an almost impossible "ask" at a time of austerity in Europe and when other major carbon emitters -- China, the United States and India -- are perceived as doing far less.

Some voices are driving for a cut in allowances for the next trading phase, running from 2013-2020.

The idea was backed last week by the European Parliament's environment committee and has the support of the EU Corporate Leaders Group, a panel launched by the Prince of Wales to lobby for green policymaking.

"We need an immediate and meaningful recalibration of the ETS to drive up the price of CO2," said Graeme Sweeney, an executive vice president at Shell.

"This action will provide a strong CO2 price signal that business can respond to."

What happens to Europe's troubled child next year will be closely scrutinised by other countries which have launched, or plan to launch, their own ETS.

Australia is to set up its own ETS from 2015 and talks are underway for hooking this up with an existing market in neighbouring New Zealand.

In the United States, 10 East Coast states launched a cap-and-trade system last year that covers the power sector and California in September approved a cap-and-trade market from 2012.

China is working on pilot schemes in carbon trade while South Korea is pursuing a "cap without trade" initiative involving some 450 companies from next year in preparation for a full ETS from 2015.

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dogbert
2.2 / 5 (13) Dec 26, 2011
After fluctuating in the past few years between 15 and 25 euros (19.5 and 32.5 dollars) per tonne of CO2, carbon crashed in 2011. Last week, it was changing hands at 6.5 euros (8.45 dollars) a tonne, the lowest on record.


Sanity is being rediscovered.

Carbon dioxide is an essential part of the energy cycle on earth. Attempts to curtail it are misdirected.
Callippo
2.1 / 5 (7) Dec 26, 2011
European carbon market suffers in annus horribilis
IMO the absence of carbon market actually helps in fight with global warming, despite its proponents are willing to admit it or not. How is it possible?
The problem of emissions trading is the fact, it virtualizes the main purpose of carbon tax, i.e. the providing economic incentives for achieving reductions in the emissions of pollutants, the collection of money into introduction of green-house gases free technologies in particular.
Instead of it, the rich companies of western word are sponsoring the introduction of older fossil carbon technologies at the less developed countries and nothing forces them to limit their own production of green-house gases.
It was clear from the very beginning, the carbon trading is a compromise in fight with AGW based on reduction of carbon emissions. It just helps the people involved to become rich with mediation of this huge money exchange. If it's so, why to worry the end of emission trading?
Callippo
1.5 / 5 (8) Dec 26, 2011
Carbon dioxide is an essential part of the energy cycle on earth.
This is of course another nonsense, just from the opposite point of view. The current carbon cycle is based on gradual burial of carbon in form of fossil carbon beneath the earth, not on its release into atmosphere. It's quite opposite trend and we should indeed consider the consequences.

But for me the main problem of fossil fuel sources isn't in their contribution to global warming (which is disputable to say at least), but in the risk of geopolitical instability, when they become depleted, which would lead into global nuclear war. We should prepare the backup solution and start with research and implementation of cold fusion in advance, before the end just happens. Even the alternative energy sources will not help us with consumption of huge portion of oil in chemical and plastic industry, but it will still improve the financial situation, not to say about the environmental situation.
dogbert
1.8 / 5 (10) Dec 26, 2011
The current carbon cycle is based on gradual burial of carbon in form of fossil carbon beneath the earth, not on its release into atmosphere.


You neglect the recycling of carbon as calcium carbonate in the oceans.
Callippo
1.7 / 5 (6) Dec 26, 2011
It's just another way of carbon burial. The portion of carbon dioxide is recycled with geological processes, but the general trend of carbon dioxide concentration from Devon times is declining. IMO the main problem of fossil fuel carbon burning is rather the acidification of oceans and pollution with aerosols (which induces the droughts), but IMO the main portion of global warming itself is of geothermal origin and the people can do absolutely nothing with it. If they can do nothing with it, why to waste additional energy (and fossil carbon) in fight with global warming? Such behavior has simply no logics by itself, until most of energy is produced just with fossil fuel burning. We should find the viable replacement for these sources first (actually we already found it in form of cold fusion).

I'd support the fight against AGW from the reasons above given - but under situation, when it just increases the consumption of fossil fuels, it's just another way to the hell.
Callippo
1.8 / 5 (5) Dec 26, 2011
What we should do by now is actually quite simple.

Even after twenty years of cold fusion research I'm still missing single one independently validated and peer-reviewed publication in Nature or Science journals, which is claiming, the cold fusion is absolutely impossible, not a single Higgs boson of redundant energy is released during heating or electrolysis of nickel with hydrogen compound under conditions, which are routinely claimed with various cold fusion proponents.

Until such publication is missing, it has no meaning to speculate about true reason of mainstream science, the physics in particular, the main purpose of which is to provide salaries for people involved - not the progress of human civilization. And it has no meaning to speculate about AGW and further strategies of fight with it.
ryggesogn2
2.4 / 5 (14) Dec 26, 2011
"This market was put together to give a price signal that would spur investment in decarbonising the economy," says Pierre Ducret, head of CDC Climat, a subsidiary in climate market services owned by the French state bank Caisse des Depots.

"But prices today are so low that this tool is just not effective."

This is a top down, artificial market. This is not mentioned as a cause for failure but should be.
Shootist
2.3 / 5 (12) Dec 26, 2011
Just what the world needs . . . another artificial market. A market where the cronies of politicians can make more money. The people who support this are either criminal or stupid.

"The Polar Bears will be fine." - Freeman Dyson
Callippo
2 / 5 (4) Dec 26, 2011
The people who support this are either criminal or stupid.
It's easy to say, but more difficult to prove. I don't like the people, who are claiming something without further explanation - no matter whether they're politicians already - or just a politician wannabes or beginners. The people spreading religious slogans without reasoning of their motivations are simply suspicious for me as a whole - no matter which actual power they already have.
Nanobanano
2.1 / 5 (7) Dec 26, 2011
Attempts to make a "market" based on something you are hoping to eliminate is really not very bright.

"Buy my Junk please! Buy my Junk! Buy the 'rights' to make Junk of your own!"

The problem is the politicians do not understand the scale of the numbers they deal with, and perhaps neither do most people in the science community.

You cannot do much of anything in modern civilization without creating pollution of some sort, and simply "capping and trading" will never, ever solve the problem.

In order to stop the keeling curve's rise, they need to replace a full 10% of ALL CO2 emissions world wide with ZERO EMISSIONS energy sources, and NEVER allow it to go above that number again, regardless of population growth.

Since people's basic needs and heating/cooling needs will always be about the same, there is no way to reduce the energy demand, therefore the only way to meet that target is to BAN coal and gasoline and replace them with nuclear and solar/wind...
MorituriMax
1 / 5 (1) Dec 26, 2011
Who would ever have thought that imaginary carbon money would sink in value!?!?

Callippo,
What we should do by now is actually quite simple.
Switch to aether-fusion.
Howhot
1.7 / 5 (6) Dec 26, 2011
We need the United Nations to work together and help re-adjust the CO2 trading system. I think Obama would support a strong effort by the USA to control AGW green house gas emissions from industry using CO2 cap and trade system. In only makes logical sense to pursue the approach as industrialist will be familiar with trading system and the cost of CO2 creation will modify industrial designs to improve energy.
Nanobanano
2.6 / 5 (5) Dec 26, 2011
Howhot:

Do you trade in garbage? Dog shit maybe?

Who buys garbage? nobody.

You have to PAY somebody to take your garbage away, because it's worse than useless. That's how CO2 is. Nobody "wants" CO2, and trading a fake currency to give someone the "rights" to make more CO2 is a joke.

Does nobody actually think about this stuff?

If the goal is to try to make alternative fuels more attractive, then really subsizing alternatives is the way to go.

After I thought about it a moment, a direct tax does not work, because electricity companies would just raise the price of electricity, which would cause the poor and middle class to suffer the consequences.

Then again, if people were educated and had half as many children, they'd have twice as much wealth and everyone would be able to afford wind and solar power without destroying the environment.

God said "multiply", not "exponentiate".
Davecoolman
3.3 / 5 (7) Dec 26, 2011
Oh the Horror!
But prices today are so low that this tool is just not effective."

Rock-bottom prices for carbon mean that power companies, cement makers and other big emitters see little need to invest long-term in energy efficiency or switch out of fossil fuels.

The Eu today announced a double dip rescission. The Carbon market is in free fall. the Loony Green Eco fanatics are desperately re announcing the same old warn out doom and gloom scenarios. The end is near repent and pay carbon taxes. NOT A HOPE IN HELL!

Boy this really is a bonus to a very merry Christmas.
Thanks all you Warmist you really have made my day!

Wishing the IPPC, The EU,The EPA.Obuma, Al Bore, David(Save Santa)Lunatic Suzuki. and all you data Fugger's and manipulators.
A Very Happy new Year.

Howhot
2.3 / 5 (3) Dec 26, 2011
It only make sense in 2012 that the USA makes an effort to curb it's fossil fuel consumption via an EU like Cap-an-trade system. With Canada out of the picture, where is the free world going to turn. Obviously, AGW is a global issue with deep ramifications for our children, and our children's children (... etc.). How are the children going live when global average temperatures look to average 10C higher in 2100 (that is just ~88 years away). The only group that has looked at this extinction event realistically has been the IPPC, and Al Gore. It seems to me that Cap-n-Trade of CO2 at 1990 levels creates an very profitable and workable trading system that would encourage new green methods of energy production, and the development of green conservation technologies that would benefit our dear children.

There is No dog-shit there Nano. And it will cost some, but not nearly as much as you might think. 1/10c per KWh.

Howhot
2.3 / 5 (3) Dec 26, 2011
DavidCool said: "The Eu today announced a double dip rescission. The Carbon market is in free fall."

But you know what is interesting is that if you watch all of the markets, CO2 seems to track gold. Just an observation I've noticed.

So anyway, I think Green is going to the future economy bargaining chip. Buy low, sell high as they say (unless you like bear traps).

omatumr
1.5 / 5 (8) Dec 26, 2011
May leaders of nations and scientific organizations join the rest of mankind this Holiday Season in admitting powerlessness over the forces that:

1. Gave birth to the Earth and its elements five billion years (5 Gyr) ago
2. Produced the Star of Bethlehem two thousand years (~2012 yrs) ago
3. Vaporized Hiroshima fifty-six years (56 yrs) ago in 1945, and
4. Scared world leaders into futile but dangerous efforts to
_a.) Unite Nations against Global Climate Change and
_b.) Control access to information on Nuclear Energy

Carbon trading and the AGW scare will vanish if we seriously study events that produced our elements, gave birth to the Solar System, and still control our fate today.

http://dl.dropbox...asks.pdf

See CMEs (coronal mass ejections) approaching Earth now

http://spaceweather.com/

Discussed on climate blogs:

http://judithcurr...w-122311

Best wishes for the Holidays!
Oliver K. Manuel
http://myprofile....anuelo09
Howhot
2.6 / 5 (5) Dec 27, 2011
Yeah the AGW scare will disappear when mankind finally sees the 10C global average temp rise over the next 80 years, and does something about it! I think we will see 2C by 2020.

All caused by Greenhouse gases leached from the bowls of the earth by mans instruments of Eco terraforming.

Leading the charge for reform is Al Gore. United Nations, cap-n-trade will save mankind.
Howhot
2.6 / 5 (5) Dec 27, 2011
@Nano: I see what you are saying, a direct tax on CO2 creation will just be passed onto the consumer and effect no change. Cap and trade on the other hand, forces the delivery of CO2 efficiencies through the market. I just wanted to make the point that just because a market is at a low, it doesn't make it invalid or lacking of traders.
barakn
3 / 5 (2) Dec 27, 2011
Perhaps the market that is doing what it is supposed to, and people are failing to recognize that it has more than one use. The economy is weak, the price of emitting carbon goes down, encouraging existing companies to expand and new ones to start. The economy picks up, the cost of emitting carbon increases, the companies use some of their new-found wealth to invest in efficiency measures or carbon capture.
Wolf358
3 / 5 (2) Dec 29, 2011
CO2 is real. Economies are made-up. It may take longer, but real wins every time.
ryggesogn2
1 / 5 (4) Dec 29, 2011
CO2 is real. Economies are made-up. It may take longer, but real wins every time.

Economies are made up?
An economy is the process of resource allocation by living things. It's how living things use CO2 and O2 to live.
Shelgeyr
3.7 / 5 (6) Dec 29, 2011
The European carbon market had a horrible year, because it is a horrible idea. Look for more of the same, or worse, next year.
p1ll
2.3 / 5 (3) Dec 29, 2011
petroleum fuels humanity.

Warmists would rather we fuel technological progress with sunshine and summer breezes.

Its ironic that technology that will allow us to eventually stop using fossil fuels will be achieved through the use of fossil fuel.