The EU is a basket-case, teetering, so when the European Parliament had the chance to “fix” the carbon market yesterday, they surprised everyone and chose not to. Being unfixed, it’s free to collapse, which it did and by 40%.
The Economist headline today is “Carbon Trading Below Junk Status”.
The EU carbon market once was around €22/tCO2 (that was 2008). Australia turned up five years late to the party, and is still trying to trade at similar rates.
Today Point Carbon is listing the carbon price as “€2.80“. Obviously, subject to change, and possibly trending-to-zero.
[BusinessTimes] “Campaigners and traders warn the carbon price could now fall below 2 euros or even to near zero in the coming weeks, and government sales could fail if they don’t meet minimum price requirements, as banks that act as liquidity providers pull out.”
The EU carbon market is not dead yet, but this could be a game changer
[The Economist] The rejection [of the bill to rescue the carbon market] was a surprise. The parliament’s environment committee had looked at the plan in February and approved it by a surprisingly wide margin of 38 votes to 25.
As expected, most members of the largest political alliance, the centre-right European People’s Party, voted against the proposal. This was needed, they argued, to protect consumers from higher energy bills. What came as a surprise is the fact that all but four British conservative members of the European Parliament also voted against the plan. In doing so they defied their own government, which has introduced a carbon floor price in Britain that could soon be higher than the European carbon price. And the European Socialists, which had been expected mostly to back the proposals, instead split, with 44 in favour of the plan and 31 against.”
Go the Brits!
The Economist speculates on whether the proposal might be resurrected (it’s been sent back to the environment committee). It could come back. Though ultimately, the MEP’s would have to change their minds. Since it was an important vote, and practically everyone turned up on the day, that’s a good sign. It might be hard to get any version through. Still, hold the champagne. The vote was 334 to 315.
There goes the Australian budget
The next Australian Budget is delivered in May. It was never going to be in surplus anyway was it?
[The Australian] LABOR will revise down its carbon tax revenue estimates following a crash in the European carbon market, at a likely multi-billion dollar cost to the federal budget.
Five seconds after the price fell, Australian’s started asking why we are paying five times as much. Greg Combet said (effectively) but it’s only for two years. (We all feel so much better then.)
[The Australian] Australian Chamber of Commerce and Industry economics director Greg Evans described the Australian scheme as “economic recklessness” and said it should be scrapped.
Minerals Council of Australia chief executive Mitch Hooke declared the scheme was now “untenable”.
Climate Change Minister Greg Combet said the government would revise its forecasts for its carbon price revenue when it delivered the budget in May.
Mr Combet said linking with the European scheme was still two years away. A lot could happen in that time, and the Europeans would try other measures to raise their carbon price.
The carbon price will be linked with the EU scheme from July 2015 and the price will float. [or sink -- wonders Jo]
Opposition Treasury spokesman Joe Hockey said it’s a “$7bn revenue hole”. Henry Ergas estimates $10 billion (and that’s just two financial years).
Last year the Australia Treasury predicted by 2015 the carbon price would be $29 a tonne.
Gillard can compensate some people, but whatever she does, she can’t compensate The Nation.
h/t Stefan, Jim Simpson, ces