UK carbon emissions prices slide on oversupply
Date: 25-Nov-02
Country: UK
The market traded down to 4.40 pounds ($6.95) on Thursday, after having climbed to 12.50 pounds ($19.74) in the past month.
The voluntary trading scheme, launched in April, enables companies that cut greenhouse gas emissions above government-agreed targets to sell credits to those unable to meet the reductions.
"More companies that have verified their emissions are coming through (with credits) and want to realise some value - and there's nothing on the buy side," said John Molloy of brokers TFS.
Sellers had been in short supply as few out of the 34 companies that took part in a government auction in April to directly receive credits had verified their emissions levels, driving prices higher.
Most have targets to cut emissions by around 10 percent, mainly through increased energy efficiency. Thirteen have now verified their emissions levels, a government spokeswoman said.
Out of these, chemical company Ineos Fluor has been the biggest seller, while energy major Shell has been the main trading player, industry sources said.
Companies missing their targets lose a rebate on the climate change levy - a tax on industry's energy use - providing firms with a powerful financial incentive to buy the credits, which had added to the heat under the market.
But bids dropped to 3.50 pounds on Thursday, against offers of 5.15 pounds, as many of the larger companies covered by the levy have already bought credits to ensure meeting their targets, brokers said.
"This may change as more climate change levy companies realise they may be short, though we see declining demand," said Albrecht Von Ruffer of brokers Natsource.
Most trades are still small parcels of anywhere between 200 and 15,000 tonnes of carbon dioxide equivalent, brokers said.
The British government is keen to kickstart UK emissions trading ahead of a possible international system by 2008, as part of its commitments to the U.N. Kyoto Protocol, with greenhouse gases blamed for global warming.
