UK carbon emissions prices rise as trade picks up
Date: 21-Jun-02
Country: UK
Author: Neil Chatterjee
"The last trade was at seven pounds ($10.48) a tonne," said Nicola Steen, vice president of brokers CO2e.com, adding that recent prices had been around six pounds and typical transaction sizes were 5-15,000 tonnes of carbon dioxide equivalent.
Many British firms now have targets to cut their emissions of greenhouse gases from fossil fuel use, such as carbon dioxide, blamed by many scientists for global warming.
If they make these targets they can gain carbon allowances to sell under the voluntary UK emissions trading scheme, launched in April. Companies that miss their goal can buy allowances to offset their emissions.
Carbon allowances were between three and six pounds in April, though prices are likely to be volatile because of illiquidity.
Emissions trading was one of the means set out by the U.N. Kyoto Protocol to reduce greenhouse gases. The UK was keen to kickstart the process, ahead of a proposed mandatory EU system for carbon dioxide by 2005 and possible international trading by 2008.
Thirty-four organisations entered the scheme directly, with nearly 6000 other companies expected to join UK trading this year, already holding agreements to cut emissions under the climate change levy scheme, for which they will receive tax rebates on energy use.
"We've seen a significant rise in the price of UK allowances in recent weeks, which has been principally driven by companies with climate change agreements hedging their exposure to losing the rebate," Tim Atkinson, of brokers Natsource, told Reuters.
He said the market was now trading daily.
Analysts at the Emissions Trading Stategies conference in London were divided as to which way the price would move.
"The climate change levy is an enormous incentive to start trading," said Ian Calvert of British Sugar, adding that at the current price it was much cheaper for companies to buy allowances than risk losing their tax rebate.
But Steen said: "I think the price will go down - there's potentially large volumes from big companies.
"The big players are not doing a lot of trading yet as they are still verifying (their emissions levels)."
She said CO2e.com had made the two-day conference "emissions neutral" by estimating energy use at the venue as well as particpants' travel and accomodation, and offsetting this through providing energy efficient light bulbs at some tourism industry sites in Jamaica.