EU Carbon Emissions Increase 3.5% in 2010, First Advance in Three Years

Emissions from factories and power stations in the European Union carbon market rose 3.5 percent last year as freezing weather boosted energy consumption, according to preliminary data.

Emissions increased to 1.754 billion metric tons in 2010, the first gain in three years, from 1.695 billion tons for the same installations in 2009, according to data published today on the EU website. While the advance exceeded the 2.7 percent median estimate of nine analysts surveyed last month by Bloomberg, EU carbon prices were little changed today.

“The numbers give us no cause to revise our price forecast for the coming years,” Trevor Sikorski, a London-based analyst at Barclays Plc, said today in a note to investors. The EU market has surplus allowances of about 455 million tons for the five years ending in 2012, he estimates, so slightly higher- than-forecast 2010 emissions are “neither here nor there.”

The latest figures show that the EU allocated more permits than emitters needed for 2010. The program had an oversupply amounting to 1.9 percent of the total in 2010, down from 4.8 percent in 2009. About 13,000 participants in the six-year-old EU program, the world’s biggest greenhouse gas market, are required to turn in permits to match the carbon figures published today, or face a fine of 100 euros ($142) a ton.

Carbon permits for December fell 0.3 percent to 17.23 euros a ton on London’s ICE Futures Europe exchange as of 5:30 p.m. They have jumped 21 percent this year, helped by speculation that demand for fossil fuels and emission allowances will increase as Europe reduce its reliance on reactors in the wake of this month’s nuclear disaster in Japan.

Power Industry

EU emissions from the power industry rose 0.4 percent in 2010, excluding facilities that distribute heat, according to an estimate from Bloomberg New Energy Finance in London based on today’s data. That compares with its forecast of 0.3 percent.

The economic recession curbed EU emissions by 11 percent in 2009. The recovering economy and cold weather helped boost output last year. December was the coldest on record in the U.K., according to the Met Office. France temperatures were 3.1 degrees Celsius (5.6 Fahrenheit) below average in January last year, according to the nation’s electricity grid operator.

The preliminary EU emissions figures, which are 90 percent complete, follow yesterday’s report from the U.K. showing its emissions, including those not under the EU program, rose 2.8 percent in 2010, the biggest gain in at least two decades.

German factories and power stations in the carbon market boosted emissions by 6 percent, while those in Poland rose 4.4 percent. Installations in Portugal and Spain had the biggest declines, 15 percent and 12 percent respectively.

German Reactors

EU emissions may rise at 3.6 percent this year, according to the Bloomberg survey of analysts. Germany closed seven reactors following radiation leaks at Japan’s Fukushima Dai-Ichi plant. That will probably increase burning of fossil fuels in the bloc.

Verified emissions were below the cap in the European trading system, known as the ETS, for the fifth year out of the six, Sandbag, a London-based climate lobby group, said in an e- mailed statement.

“Europe’s flagship climate policy has great potential, but it currently risks becoming an environmental hindrance,” Damien Morris, senior policy adviser, said in the e-mail. “If politicians have the courage to tighten the cap, then the ETS could help pave the way for a low-carbon Europe.”

The iron and steel sector has accrued a 212 million-ton surplus of allowances so far because the bloc’s governments gave away too many permits, Sandbag estimated. Those allowances are worth about 3.4 billion euros at current prices, equivalent to Europe’s annual financial support for renewable power, according to the statement.

Sikorski of Barclays said the ETS is succeeding in reducing emissions. The EU report for 2010 shows power-sector emissions rose at 2.1 percent, while consumption of electricity increased 2.6 percent, he said. “The EU emissions trading system is greening the EU.”

To contact the reporters on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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