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Confidence in the carbon market

World Coal,


The EU Emissions Trading Scheme (ETS) has regained the confidence of the carbon market, according to the respondents of Thomson Reuters Point Carbon’s annual carbon market survey.

The results of the survey – Carbon 2014 – reveal that the EU ETS and the Western Climate Initiative (WCI) have both overcome political and legal challenges, with 90% of respondents believing the EU ETS will survive beyond 2020, and 79% believing the WCI will do so; significantly higher levels of confidence than other emissions reduction schemes around the world.

Negative attention

“Despite the overall negative attention on carbon markets over the last few years, the resolution of the backloading debate and its final implementation in February 2014 might have been seen by the market as evidence that there is still political willingness to act” said Anders Nordeng, senior analyst at Thomson Reuters Point Carbon and author of the report, continuing “And it may be that in the absence of other credible alternatives, emission trading is seen as the best option”.

The market is increasingly viewing the EU ETS as more cost-effective however, with 52% agreeing it is the most cost-effective way to reduce emissions, up from 49% in 2013 and 42% in 2009.

Greenhouse gas?

In terms of greenhouse gas abatement, 58% think that cap-and-trade is the best instrument that policy makers can agree on. “Stakeholders acknowledge the difficulties in reaching an agreement for ways to put a cost on emissions. Both companies and governments tend to favour market based mechanisms over taxes” commented Nordeng.

A falling number of people considered the long-term carbon price a decisive factor in investment decisions however, down from 45% in 2013 to 38% this year, “a drop that is not likely to please environmentalist NGOs and others that question whether the EU ETS really spurs green investments” according to Nordeng.

Optimism outside EU

Outside the EU, nascent carbon markets remain optimistic in their outlook. In California, 68% of respondents expect other jurisdictions to join the WCI market, either before or after 2020, with Oregon, Washington, Alberta the likeliest candidates. The majority of respondents expect a carbon price around US$ 11-13/t in 2014.

Participants in the Clean Development Mechanism (CDM) reported a surprising optimism for the long-term perspectives. Some 60% believe the EU ETS will continue to allow the use of international emission credits after 2020, and 27% believe California will accept them. In both cases a change of legislation would be necessary.

Chinese support

In China, there have been clear signals of political support for a nationwide ETS following the rollout of seven pilot regional trading schemes, five of which are already in operation; 80% of respondents expect to see a national scheme by 2020. The majority of respondents expect Chinese domestic offsets (CCER) prices above 5 renminbi (€0.6), which is higher than current trading levels for CERs.

Australian reaction

In Australia, 47% of respondents believe the Carbon Pricing Mechanism (CPM) will be dismantled once the new Senate convenes in early July while 18% still see a chance that the CPM will survive. “The relatively strong optimism for the continuation of the carbon market probably reflects the fact that the repeal bill will need the support of handful of non-affiliated senators,” commented Nordeng.

Following the results of last year’s survey which showed that two thirds of respondents believed a Korean emission trading system would be in place by 2015, this year’s survey shows that now only 46% believe the scheme will start as scheduled on 1 January 2015. 45% of Korean stakeholders expect the scheme to reduce emissions in the years 2015-2018.

Written by Thomson Reuters Point Carbon.

Edited by Katie Woodward

Read the article online at: https://www.worldcoal.com/coal/22052014/carbon_market_confidence_879/


 

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