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Zombie carbon market falls 60%, revived by EU decree – media spins “soaring success”

Posted By Joanne Nova On March 6, 2014 @ 2:55 am In Global Warming | Comments Disabled

Global Carbon Markets peaked in 2011 at €96bn euro. Over the next two years they plummeted to €36bn* euro collapsing by 60%. Though the press didn’t seem in a hurry to convey that, and if I search,  no government funded agency has done a graph like this below (perhaps I missed it?)

The decline was looking pretty terminal, but the EU government has now voted to backload (which means hold off the permits and cut the supply). This is a desperate measure involving over half the new permits to keep the “free” market alive.

Instead, the news agencies with greener leanings have underplayed the fall, and the 60% decline is now invisibly massaged in places like BusinessGreen into a “market set to soar”. This is not just media-spin but a news-through-a-centrifuge.

The value of the world’s carbon markets is set to soar to €64bn (£53bn) this year, up from €39bn in 2013, as the European Union launches a temporary fix to revive its ailing emissions trading system.

Peak carbon came and went. Those 2014 figures are speculation. Otherwise the trend was terminal.

A breathless journalist at Thompson Reuters describes the possible revival of the market back to 30% below the peak as “astounding”:

Emil Dimantchev, analyst at Thomson Reuters Point Carbon, anticipates that such significant growth will be driven by “expectations that after imminent backloading is implemented early in 2014, EUA prices could rise to €7.5/t, increasing over-the-counter and exchange traded liquidity. This would lead to an astounding increase in value, up by more than two thirds to €61bn ($US84bn) from €36bn ($US49bn) in 2013”. –BusinessSpectator

Let’s not forget this soaring revival is only due to Government decree. The EU voted to simply hold back some promised carbon credits. They cornered the market from the start. There is nothing “free” about this fixed market, and the people who will pay (consumers and taxpayers, us) don’t get a choice. The Australian carbon market is still tied to the EU one. Ask Bill Shorten (the opposition leader) why a group of EU bureaucrats are setting the price.

The long-awaited “backloading” of European Union carbon allowance auctions will start on 12 March, marking the first time that governments will sell fewer permits than required by power producers

London — The European Union’s Emissions Trading System has been widely criticised for failing to provide sufficient incentive to stop the region’s generators burning coal rather than gas or other cleaner fuels. However, from next Wednesday, the EU ETS is set to change radically, according to research company Bloomberg New Energy Finance.

On 12 March, the EU will start to “backload”, or delay, many of its auctions of carbon permits, restricting by more than 50% the number of allowances coming onto the market and presenting both utilities and industrial companies with a radically different emissions trading environment compared to the one that has prevailed in recent years. — Bloomberg

These are not small changes. Effectively the government has just taken half the new permits off the market.

As a result of the backloading plan approved by EU member states this month, and due to come into effect from next week:

Governments will cut the supply of new carbon permits by 53% in an effort to bring it closer to balance with demand, and to ensure higher prices. These plummeted from a high of EUR 29/tCO2e in 2008 to an average of EUR 4.46 in 2013 as a result of the economic downturn that followed the financial crisis. The auctions that are delayed from 2014 to 2016 will be rescheduled for later in the decade.

• The price of permits has gained 40% to EUR 7 per tonne since the beginning of this year in anticipation of the backloading measure. — Bloomberg

The EU market pretty much is the global market:

“The EU Emissions Trading Scheme (ETS) has operated since 2005 and represented 94% of the value and 88% of the traded volume of global carbon markets in 2013, the analysts said.”

The market fell so badly in 2012 that after a decade of glossy releases, the World Bank completely canceled the State of The Carbon Market report about 2012. Presumably they won’t bring it back after the even worse figures of 2013. It’s not like the figures mattered to the market then — it was all about the PR.

Where is the accountability for these distant bureaucratic enclaves funded with tax money? They don’t even try to appear impartial any more.


*I’ve seen €36bn, €38bn, and even a rounded  €40bn for the 2013 global market value. The latest figure from 28th Feb is 36 from Point Carbon.

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