Benchmark 2007 EU Greenhouse Gas Emissions Data Set To Rock The Carbon Market

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All participants to the EU Emissions Trading Scheme ought to have submitted crucial data on their 2007 greenhouse gas emissions levels by 31 March. The greenhouse gas data would be sourced by around 10,500 companies involved in carbon trading and is an important factor influencing the market price of traded carbon.

But many of the parties failed to meet the deadline, which is why the EU authorities in charge of the information said they will release the data to the public at a later date.

Emissions data is of vital importance for market traders because it shows the level of demand for the instruments they trade. The data is seen as a benchmark number setting the appropriate carbon price.

EU rules for energy-intensive industry mandate the submission of one emissions permit for every ton of carbon dioxide emissions. The permits, called EU Allowances (EUAs) can be “offset” by trading them on the exchange. Volumes as well as the prices on the European Climate Exchange have seen a steady rise since the exchange was created in 2005. During March close to 120 million tons EUAs were traded, an average volume of futures and options of 6.3 million. This marked an increase of 61% compared to March 2007.

Reuters quotes a Deutsche Bank analyst Mark Lewis who said that he expects 2007 carbon dioxide emissions are likely between 2,180-2,220 million tons. 2007 levels were between 2,100-2,140 million tons. Lewis added that his prognosis was made assuming unchanged economic demand, weather and commodity prices.

This is good news for carbon traders, because the 2008 permit supply stands at 2,083 million tons, so there’s a shortage of supply. That should drive up EUA prices in the second phase of the carbon trading scheme. Lewis said the price is likely to go up to 35 euros per ton during 2008-12 (the second phase).

This is a drastic turnaround from the first phase of the carbon market (2005-2007), which saw an oversupply of permits, causing a carbon price to fall. Last Friday, benchmark EUA contracts for 2008 delivery were trading down 14 cents at 22.12 euros ($34.87).

The 27 national governments which together make up the European Union enter the permissions data in a central Community Independent Transaction Log (CITL), which is a real time tool accessible to the public. It lists all the individual participants by name, company name, phone number and email address.

The authorities in charge of CITL reported that not enough data had been submitted for them to release it. At least 80% of the data entered for the 2006 emissions needs to have been reported before the numbers will be released. This is so the markets don’t trade on false information.

CITL announced that it won’t “give public access to installation-level verified emissions data today [April 1].” Instead, the data will be released as soon as enough submissions have been registered to make the 80% grade.

The UK has independently published estimates of 2007 greenhouse gas emissions levels. Government officials put out provisional figures indicating UK emission levels reached 639.4 million tons. This was 2 percent lower than the 2006 figure of 652.3 million tons.

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