Carbon prices at all time low as of - 09 Feb 2009
Carbon price close to record low as European sell-off continues
Experts predict €10 EUAs could represent good deal for long-term investors
The price of carbon allowance in the EU emissions trading scheme (ETS) was at close to record lows in trading this morning as weak energy commodity prices and a continued sell-off of allowances from heavy industry continued to drive down the price.
The price of EU allowances (EUAs) has been declining steadily over the past month and has now fallen more than 40 per cent in the past 30 days to €10.02 (£8.71) as decreased production in a number of carbon-intensive industries means that large numbers of firms are looking to sell credits they no longer need. "We are still seeing a lot of selling in most industrial sectors, particularly in eastern Europe," explained Stig Schgolset, senior analyst at research firm Point Carbon, adding that the company was now predicting that the price could slip below €10 and stay there for some time.
He said that falling production across many sectors, including metal, paper and pulp, glass and cement, meant many firms had a surplus of EUAs they were still looking to offload. Market watchers are convinced that the price of carbon will recover as soon as production levels increase and Point Carbon still believes EUAs will be priced at more than €20 as the end of the current phase of trading approaches in 2012.
But Schgolset said that many firms are not in a position to wait and sell their allowances at higher prices. "Many companies need cash now," he said. "It is shortsighted, but if the alternative is going bankrupt, it is sensible [to sell]." However, he added that those companies with deeper pockets would be advised to hold on to their allowances until the 2015 to 2020 period when lower emissions caps are likely to push the price of credits skywards. He also predicted that speculators were in a good position to pick up allowances at bargain prices that will deliver strong returns over the long term.
"You can hold on to EUAs right up to 2020, so if you have the pockets, there are some real bargains around." In related news, a new survey from the Greenhouse Gas (GHG) Management Institute in the US and recruitment agency Sequence Staffing has warned that the rapid expansion of carbon trading globally could result in a serious skills crisis that threatens to hamper the development and credibility of the market.
The survey of 700 carbon market professionals found that while two thirds of respondents had hired a GHG expert in the past six months, almost 84 per cent believed there was a shortage of qualified GHG staff and experts. Michael Gillenwater, dean of the GHG Management Institute, said that unless efforts are taken to expand the skills pool of the carbon market, there was a risk that its credibility could be damaged by Enron-style accounting scandals.
"In a field that is technical and open to accounting mistakes, it is crucial that there are trained professionals capable of supporting a cap-and-trade program or carbon tax system," he said. "Our survey indicates that experts believe there is a serious risk of carbon markets and policies being discredited in the future by scandals like the one we saw with Enron and in the mortgage markets. To avoid this, we will need professionals with the skills and ethics to account, audit, and manage GHG emissions."
Issued by: BusinessGreen
Author: James Murray
Issue date: 09 Feb 2009