Carbon prices tumble 65 percent
May 4, 2006
Carbon prices tumbled 65 percent as a number of European countries announced lower than expected carbon emissions in 2005, suggesting there will be a surplus of pollution-permitting carbon credits.
While drop in prices is good news from an emissions standpoint — Europe is polluting less — it provides a stark reminder that short-term fluctuations can cause jitters in the emerging market. The UN acted to soothe concerns by assuring that investments in solar, wind and other green energy projects in developing countries will go ahead as planned.
According to Reuters, the value of Certified Emission Reduction units (CERs), which allow polluting firms in European countries to fund pollution cuts in developing countries, plunged from 22 euros to less 9 euros over the past couple weeks.
Photo by R. Butler
Reuters quoted James Emanuel, Head of Carbon Trading at brokers CO2e.com, as saying “No-one will pay 20 euros for a CER now when the EUA is at 12 euros.” The EUA or European Union Allowance, is the more valuable European carbon credit traded on the European Climate Exchange.
The EU plans to meet its Kyoto commitments through the European Climate Exchange, which it established last year when $6.6 billion in credit contracts were traded. Analysts expect the carbon trading market to grow to a $23 billion marketplace by 2010.
Several important conservation initiatives are based on the concept of a market where industrialized countries buy carbon emissions credits from developing nations in exchange for forest protection. One such proposal from the Coalition for Rainforest Nations, a group of 10 tropical countries, is garnering international interest.
With reporting from Reuters