The global economic slowdown will increase available carbon trading licenses in the European emissio...
The global economic slowdown will increase available carbon trading licenses in the European emissions trading scheme (ETS) by almost half, lowering the price of carbon-based exchange traded funds (ETFs) and commodities (ETCs), analyst IDEAcarbon has said.
With European industrial output predicted to fall to 1% over 2008 and decline by 0.7% in 2009, total carbon emissions are also expected to decrease, lowering the shortfall of trading licences by 44% from 206m tonnes to 115m tonnes between 2008 and 2012.
As the reduced shortfall effectively represents greater supply within the market, financial instruments tied to the value of carbon trading licenses would be affected.
Alessandro Vitelli, director of strategy and intelligence at IDEAcarbon said the price of carbon-based ETFs and ETCs would likely fall as a result of increased supply of tradable allowances but added there would still be a shortfall in the number of available trading licences, which was a situation unlikely to change.
Vitelli said: “Our feeling is that the market will still be short [and] it would take an unprecedented cut or fall in emissions for the market to drive us into surplus.”
ETF Securities (ETFS) today launched Europe’s first carbon exchange traded commodity (ETC) on the London Stock Exchange (LSE).
ETFS Carbon, as the ETC is known, was designed to offer investors a simple and liquid route into the European carbon emissions trading scheme, via the carbon emissions allowance futures market.
ETFS said each individual carbon ETC was roughly equivalent to a single emissions allowance.
Between 1990 and 2005, global carbon emissions have risen by roughly a third, with major European nations such as the UK, Germany and Italy among the top ten largest emitters.
The EU’s pioneering carbon trading market now accounts for 80% of the world’s carbon and emissions trading and was valued at €30 billion over the first half of the year, with the equivalent of 750m tonnes of CO2 traded.
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