Barclays Raises Forecast for EU Carbon Prices in 2011 by 8.1% to 20 Euros
Barclays Plc raised its forecast for European Union carbon prices in 2011, citing a lower-than- expected supply of phase-three allowances to be auctioned over the next two years.
EU prices will average 20 euros ($27) a metric ton next year, 8.1 percent higher than previously estimated, Trevor Sikorski, a London-based analyst at the Barclays Capital investment bank, forecast today in an e-mailed report. The EU is setting rules for the third phase of its carbon market, the world’s largest, for the eight years starting in 2013.
“We are still very bullish for increasing prices once utility hedging of 2013 positions starts in earnest in the second quarter of 2011,” the analysts said.
Carbon prices are up 19 percent this year as utilities buy EU pollution permits to hedge their forward-power sales and Brussels-based regulators ration supply. EU regulators are considering restrictions on United Nations emission credits in under the Clean Development Mechanism for projects linked to industrial gases.
Sikorski also boosted his forecast for UN Certified Emission Reduction credits for 2012 to 20 euros a ton from 18 euros. He cut his estimate for the UN discount relative to EU allowances that year by 20 percent to 8 euros a ton.
Any UN offset ban would “tighten up liquidity in the early years of phase three by removing what will still be an important part of supply in the market,” Sikorski said.
The European Commission, regulator for the 27-nation bloc, is considering excluding UN-sponsored credits related to industrial gases including hydrofluorocarbons and nitrous oxide starting in 2013. system. The commission said they may create windfall profits for investors and undermine the integrity of the EU. Investors can use credits earned in the UN’s CDM for reducing emissions in developing countries to comply with quotas in the EU.
Systematic Weakness
“It’s crucial to look into some weaknesses in the system,” EU Climate Commissioner Connie Hedegaard told reporters on Nov. 19. “As soon as possible we’ll come up with a suggestion as how best to cope with that.”
The Bonn-based environmental group CDM Watch said in a June 14 report that some companies won “bogus credits” by artificially boosting greenhouse-gas emissions on HFC projects.
To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
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