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Carbon Emissions, Prices Drop As Downturn Bites

A steep decline in industrial production, combined with decreased demand for electricity across Europe, both caused by the economic downturn, has prompted Point Carbon to reduce its carbon emissions forecast by 500 million tonnes for the period 2008-2012, equivalent to a 4.4% reduction compared with its previous report. Point Carbon is the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

Point Carbon’s EUA price forecast for 2009 now stands at €12/t, down some €10/t on the forecast published in November. However, it is likely that this figure will increase to €19/t in 2010 and that even by this summer prices will have stabilized. Point Carbon’s 2013 forecast remains at €42/t as current bearish and bullish long-term signals are likely to cancel one another out, according to the report.

The company has also downwardly adjusted its Clean Development Mechanism and Joint Implementation supply forecasts by 93Mt from December to close to 2 giga tones of reductions expected to be generated up until 2012.

Although 2008 saw an 83% increase on the previous year in the amount of carbon dioxide equivalent being traded globally, the carbon markets in 2009 are now showing the strain of the economic downturn.

The year’s beginning witnessed the heavy selling of surplus allowances from industrial emitters. However, the report states, “the allowance surplus is a welcome avenue for raising capital for industrial companies in dire need for cash.” Point Carbon does not anticipate this trend will last for long, and points to it as an example of a healthy response in the cap-and-trade scheme in the face of dismal economic conditions.

The growing body of economic reports from governments and the International Monetary Fund forecasting greater economic contraction in 2009 is cited as the principal reason for Point Carbon’s near 500Mt reduction in forecasted carbon emissions. Dramatic decline in demand in the cement and steel industries, among the hardest hit industry emitters, is outlined in the report as having a significant part in the readjusted forecast.

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