Bank sees 2005 EU CO2 emissions trade at 10 euros/T
Author: Vera Eckert
"Brokers approach us with this price idea so we know it reflects market expectations," Armin Sandhoevel, head of Dresdner's corporate sustainability section, said on the sidelines of a finance symposium late last week.
"I think it's not unlikely that this will be a feasible level for the first trading period of 2005 to 2008, and I believe 20 euros would be the upper limit," he told Reuters after leading a workshop on the subject.
He said his bank was active in preparing for the trade and had based the forecast on experiences with pilot projects and the size of known investments into emissions reducing measures.
It is within the price band of internationally emerging price bands and compares with 20-33 euros tentatively assumed by the European Commission for 2005-2008.
Financial industries are keen to start price discovery ahead of the allocation of emissions rights next year to businesses affected by the mandatory trading scheme, which EU environment ministers agreed last December in order to fight global warming.
It will key to the bloc's efforts to meet its global climate protection targets and aims at helping cut damaging emissions more effectively than current legal or fiscal tools.
About half the 6,000 or so companies in energy, metals, minerals, pulp and cement, industries, which must comply with the scheme, are based in Germany, Europe's largest economy.
"It is clear that some countries will be net buyers such as Spain, Austria or the Netherlands, while in Germany, there will be many sellers holding high value certificates due to their earlier activities in cutting emissions," Sandhoevel said.
National allocation plans (NAPs) will award the companies free rights depending on the size of their operations, then subject them to montoring of their emission avoidance efforts.
Germany is well on course to meeting its target of cutting CO2 emissions by 21 percent from 1990 levels by 2008-2012, having already cut 19 percent because it made huge efforts in that direction in the 1990s.
The idea of the trading scheme is that it will become lucrative for firms to achieve a surplus of rights to sell to the market, while giving a financial incentive for buyers short of rights to invest in emission cutting measures.
Alongside the trading of emissions allowances from the national schemes, traders expect a further stimulus from an emerging secondary market for voluntary, certified emission cuts, which companies will use in their marketing.
"A company's risks and chances in emissions trading will depend on its real cost of cutting emissions, which makes this one of the industry's best-kept secrets," Sandhoevel said.