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EU-regulated 2015 CO2 Emissions Expected To Show Little Change On Year Fri

Apr 01, 2016

Analysts' forecasts for regulated carbon dioxide emissions under the EU Emissions Trading System in 2015 show a mixed picture ahead of data due for release Friday, with a rough consensus pointing to a modest increase or decrease from 2014 levels. 

That compares with a significant 4.6% drop in regulated CO2 emissions in 2014 from the previous year. 

The EC's annual data due Friday represent the most authoritative figures showing CO2 emissions across the 31-nation system, revealing underlying demand for carbon allowances from more than 11,000 installations across Europe. 

Commerzbank analysts said they expect verified CO2 emissions under the EU ETS to have fallen by 0.5% in 2015 from the previous year. 

EU power sector emissions may have fallen in 2015, the bank said, even as utilities increased output by 2% from the previous year, as the emissions intensity of electricity generation fell across Europe. 

"Note that the advance of renewable energies and modernization or efficiency gains from combustion plants are affecting the level of CO2 emissions per energy unit produced," the bank said in a research note March 24. 

Meanwhile, the industrial sectors are likely to show a mixed picture in 2015, with increased activity by refineries but lower production in aluminum, steel and cement, the bank said. 

"All in all, the figures should move the focus back to the problem of an over-supplied market. After all, a cumulative supply overhang of around 2 billion allowances is left from previous years. Only in the medium term will [EU Allowance] prices recover significantly, in our view," it said. 

"Political impetus as part of the reform process for the fourth trading period [2021-30] and a strengthening EU economy, which is likely to result in higher demand for emission allowances, should drive the recovery," the bank said. 

Separately, UK based carbon market lobby group Sandbag said it expects CO2 emissions to have fallen by 12 million mt to 1.802 billion mt or 0.66% in 2015 from the previous year, in a report released January 19. 

The group described 2015 as a "pause for breath" between a sharp drop in CO2 emissions in 2014 and another expected drop in 2016 as plant closures and efficiency gains continue to drive Europe's CO2 emissions down. 

However, others took a more bullish line, forecasting a modest year-on-year increase in CO2 emissions in 2015. 

Independent consulting company Energy Aspects said it expects verified CO2 emissions to have increased by around 6 million mt to 1.821 billion mt, up 0.3% from the previous year. 

Most of the increase (5 million mt) is expected to come from the industrial sector, and with power sector emissions up only 1 million mt from 2014 levels, it said in a report released January 29. 

US company PIRA Energy Group was reported to have forecast that EU ETS CO2 emissions rose by roughly 15 million mt or 1% in 2015 from the previous year -- a move that could cause a small rise in EU Allowance prices around the time the EC's data is released, followed by an expected drift lower over the summer, the company said, cited by UK-based carbon market reporting group Carbon Pulse on March 22. 

Budapest-based environmental commodity trading company Vertis said price volatility could increase as the EC's data is released Friday, pointing to a market consensus that 2015's CO2 emissions could show a year on year change of up to 1% in either direction compared with 2014's level. 

"Anything out of this range might trigger additional trades in the carbon market," Vertis said in a market comment on its website Tuesday. 

Germany's federal environment agency UBA on March 17 said the country's economy-wide CO2 emissions rose 0.7% to 908 million mt in 2015, as rising emissions from industry eclipsed a drop in the power generating sector. 

As Europe's industrial powerhouse, Germany is responsible for almost 25% of total CO2 emissions under the EU ETS. 

On April 1 each year, the EC releases raw data from around 11,000 power plants and factories showing verified CO2 emitted in the previous calendar year, but with no accompanying data aggregation or analysis. 

The EC is set to release the annual EU ETS CO2 data at 1000 GMT Friday.