Allowance outflows to new EU ETS entrants slow in H2-2015

Published 14:42 on January 18, 2016  /  Last updated at 14:42 on January 18, 2016  /  EMEA, EU ETS  /  No Comments

Just 3 million CO2 allowances were allocated to new or expanding installations in the EU’s carbon market over the past six months, representing less than 1% of the total pot of permits put aside for these so-called ‘new entrants’, the European Commission said late on Friday.

Just 3 million CO2 allowances were allocated to new or expanding installations in the EU’s carbon market over the past six months, representing less than 1% of the total pot of permits put aside for these so-called ‘new entrants’, the European Commission said late on Friday.

The figures, a testament to the slow growth currently being experienced by Europe’s energy and industrial sectors, show that some 80% of the EU’s New Entrants Reserve (NER) remains unclaimed at the start of 2016 – the fourth year in the scheme’s eight-year third trading phase.

A total 94.5 million allowances have now been handed out to or reserved for new entrants between 2013 and 2020, out of a total pot of 480.2 million and compared to 91.3 million in the Commission’s previous NER status update published in July 2015.

The Commission said a total 397 installations will benefit from these free allowances, up from the previous figure of 369 reported in the last update.

Of the allocated units, nearly 77 million of them have gone to or been earmarked for “significant” capacity extensions at 259 existing installations, working out to an average of just under 300,000 units per facility.

Meanwhile, the balance of around 18 million is assigned to 138 new facilities, or 128,300 per plant.

Some 385.7 million EUAs remain available in the NER, the Commission said. This amounts to around a fifth of the ETS emissions cap this year.

The market impact of this surplus is likely to be limited because any unallocated units in the reserve will be placed in the MSR at the end of Phase 3, though a loophole in regulations could mean lawmakers opt to hand a portion of all set-aside units to carbon leakage-hit industry.

This will be decided in legislation governing the EU ETS’ Phase 4, during which the European Commission has proposed to allow emitters to get more free EUAs for production increases – in contrast to current rules that only allow this if new capacity is built.

The Commission said it would publish its next NER status update in July.

By Mike Szabo – mike@carbon-pulse.com

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