EU carbon prices will climb to at least €9 by 2020 and may climb much higher, according to a Thomson Reuters Point Carbon annual survey of European carbon market participants and observers.
Some 76% of 457 respondents said they expected benchmark prices to rise from current levels near €7.50 to at least €9, with more than 50% predicting EUAs would top €11 and 23% saying above €15.
This is much lower than the €16.80 average predicted in a poll of 10 market analysts taken on Apr. 15, while the survey responses were received between Feb. 20 and Mar. 15.
Both price views are likely to have increased since as lawmakers have agreed to an MSR stronger than many were expecting.
Most of those surveyed expect the EU ETS to expand in scope after 2020, with 61% predicting more industry emissions to be added, 59% expecting land transport, and 46% forecasting that EU shipping will be included.
Two-thirds of respondents said they expected the EU ETS to “continue to be the main instrument for EU climate policy”.
HEDGING
30 utilities were asked how much carbon prices influence their power forward hedging structure, with half saying “to little or no extent”.
As the main buyers in the EU ETS, utilities’ are closely watched to determine demand levels for CO2 allowances, which bigger power companies buy up to three years ahead to match their forward electricity sales and lock in profit.
“The fact that so many assigned so little importance to the price of carbon is surprising, given how actively utilities are trading. It could indicate that despite the price increase over the last year, many still see the cost of emissions as insufficient to fundamentally influence the hedging structure,” Thomson Reuters said.
Some 78 of EU ETS compliance participants were asked whether they held a surplus of EUAs, with exactly half answering ‘yes’ and half ‘no’. The ‘yes’ share was down 5 percentage points on last year’s survey results.
WIDER WORLD
Just 36% of 854 respondents from all over the world thought it was likely that global leaders would reach agreement on a climate treaty in Paris this December, although the figure rose to 61% just among the administrations and international organizations that are likely to be the stakeholders closest to the negotiations.
As the Paris talks approach, few international climate policy experts believe there is any doubt the meeting will deliver a deal. Instead, they are concerned it will not be strong enough to effectively tackle climate change.
Some 72% of 28 respondents based in China expect to have a national ETS by 2017, while just 35% of 70 China-focused respondents based outside the country agreed.
In the North American carbon market, only 17% of respondents are confident the US climate target to cut GHGs 26-28% by 2025 is achievable under current and planned policies.
This year’s survey was the ninth the company has conducted. It received 1,203 respondents and covers views on the EU ETS, WCI, RGGI, the Chinese markets, South Korea, Kazahkstan, New Zealand, the CDM and JI and the international climate talks.
By Ben Garside – ben@carbon-pulse.com
