Price Fall gives Market the Jitters

"A surplus of CO₂ has seen prices plummet, says Mike Scott. But calls for cutbacks in allocations should help support the price"

The following is an abstract from the Financial Times Report on carbon emissions trading

"The price of carbon fell by almost 70 per cent at the end of April after it was revealed that the members of the EU's Emissions Trading Scheme (ETS), the mechanism for reducing greenhouse gases in line with Kyoto Protocol targets, were in surplus by 44m tonnes."

"But what does the fall mean to those looking to invest in the sector? does it create buying opportunities either in the companies involved or carbon itself?"

"The European Commission is calling on governments to reduce their allocation of permits by an average of 6 per cent in the second phase. Governments are due to submit their plans for this by June 30, although many have already said they will not meet the deadline."

"James Cameron, Vice Chairman of merchant bank Climate Change Capital, agrees. 'Improved data will lead to a better allocation of allowances by policy makers, which will lead to a more efficient allocation by the market. the price drop was a reaction to a simple case of over-allocation - It will be harder for companies to claim they need more allowances now there are real data.'"

"There are some voices of caution though. Guy Turner, Director of New Carbon Finance, concurs that phase 2 prices are likely to be higher. But he says much of the upside is already priced into the market."

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Price Fall gives Market the Jitters