Mild 2014 Seen Cutting EU Carbon Market Emissions to Record

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Carbon dioxide emissions in the European Union’s cap-and-trade program, the world’s largest, probably fell to a record last year as warmer-than-average weather curbed demand for gas and power.

Emissions from companies covered by the program dropped 5.8 percent to 1.798 billion metric tons in 2014, according to the median forecast of six analysts surveyed by Bloomberg before the EU makes the data public on Wednesday. That would be the lowest level since the bloc’s carbon market started in 2005, data from the European Environment Agency show.

Last year was Europe’s warmest on record, according to MDA Information Systems LLC in Gaithersburg, Maryland, whose data goes back to 1981. Power prices in Germany, the largest European economy, fell for a fourth year as renewable energy’s share of the nation’s electricity use rose to almost 28 percent in 2014, the government said March 5. The EU has said a glut of carbon permits that came to about 2.1 billion tons in 2013 is set to linger beyond 2020 without steps to curb it.

“The expected fall in emissions is mostly due to a warm weather year, which translates into lower demand for power,” said James Cooper, an analyst at Bloomberg New Energy Finance in London. “Higher renewables generation also played a role.”

The EU’s emissions trading system, covering about 12,000 installations owned by utilities and manufacturers, is the bloc’s main policy tool to reduce greenhouse gas discharges. It imposes decreasing pollution caps on power producers and industries from cement to paper. The permit surplus expanded as economies slowed amid the euro-zone crisis, weighing on demand.

One Ton

Each year companies must surrender enough carbon permits, which they get for free or must buy at auctions, to account for their emissions or pay fines amounting to 100 euros ($107) a ton. Each permit entitles the holder to emit one ton of carbon dioxide. Companies in the ETS emitted 1.908 billion tons of greenhouse gases in 2013.

Emission permits for December fell for the first time in 3 days on Wednesday, sliding 1.1 percent to 6.89 euros a ton on ICE Futures Europe in London. Prices tumbled 70 percent since the start of 2008 amid the glut, reaching levels that fail to deter industry from burning coal, the most-polluting fossil fuel. The EU is considering a draft law aimed at helping prices rebound by introducing a mechanism to automatically cut oversupply.

The European Commission, the 28-nation EU’s executive arm, said March 1 it would grant access to 2014 emissions data at installation level at noon Brussels time on Wednesday. No aggregate data or interpretation will be made available, it said.

U.S. Scientists

Last year was the hottest ever recorded for the earth, according to U.S. government scientists, who pegged the increase to the effect of greenhouse gases from human activities. The average temperature last year was 68 degrees Fahrenheit (20 degrees Celsius), surpassing the previous high of 66 degrees in 2010.

EU ETS emissions from power generation fell 95 million tons last year, or 8.8 percent, as demand for electricity contracted 2.5 percent, according to New Energy. Renewables, excluding hydro energy, provided 16 percent of power generated in the EU, up from 14 percent in 2013, BNEF analysts estimated.

Germany, the biggest emitter in Europe, shrank its pollution for the first time in three years in 2014, the government said Tuesday. Total greenhouse-gas emissions, including discharges outside the ETS, dropped 4.3 percent to 912 million tons of carbon dioxide equivalent, the lowest level since 2010, according to the environment ministry.

“Much of the reduction in 2014 was due to the mild winter,” Environment Minister Barbara Hendricks said in a statement. “But we owe a part of the decline to real progress on climate protection.”

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