Companies covered by the EU ETS exchanged 22.66 million international credits – all CERs – for use in the scheme over the past year, well down on the previous two years, the European Commission said.
This year’s tally is below the 40 million figure expected by analysts at Energy Aspects and gives a slightly bearish EUA price signal because it suggests that more supply will be available in future years.
The annual offset use data is closely watched by EU market participants as it could impact the amount of EUAs in circulation. However, market watchers don’t expect a major impact on either EUA or offset prices as a result of the data, partly because the market is already so vastly oversupplied by more than 1.7 billion EUAs.
Dec-16 CER prices were unchanged at €0.42 on ICE following the data release, albeit on very thin volume.
The Commission said a total of 410.3 million credits had been exchanged by EU firms over the three compliance years since the conversion became possible, but last year’s total was well down on the 255.6 million and 132.8 million over 2014 and 2013 respectively.
Companies have up to now likely handed in some 1.5 billion of the market’s estimated total usage limit of just over 1.6 billion between 2008-2020.
Emitters mostly opted to exhaust their quotas early because 2014 was the last compliance year it was possible for companies to surrender offsets issued to carbon-cutting projects for emission reductions made before 2013, the Kyoto Protocol’s first commitment period, which represented the vast majority of credits in circulation globally.
Energy Aspects still believed it would be more attractive for companies to use the carbon credit share early as they didn’t expect CER prices to fall much below their current levels, whereas EUA prices were expected to rise.
“There is little clear rationale for holding onto CERs. If CER prices cannot fall any further, then you are better off holding the EUA than a CER. As such, you might as well switch,” said Energy Aspects in a monthly report published on Friday.
Futureproof, a consultancy set up by former Sandbag analyst Damien Morris, said the data shows that the EU ETS was oversupplied by an estimated 1.846 billion units at the end of the 2015 compliance year, roughly equivalent last year’s total emissions under the scheme.
The Commission added that a total of 24.8 million CERs from Kyoto’s second compliance period (2013-2020) had now been turned in.
The vast majority, some 15.4 million or 62%, came from China, which aligns with the country’s record of being home to the most number of CDM projects.
Surprisingly, Uzbekistan ranked second, with 4.6 million CERs from a country that has only 15 registered projects.
UN data shows that four of those facilities – all ‘fugitive’ projects that plug holes in natural gas pipelines – have received CP2 CERs so far, with UK-based Macquarie Bank and Climate Change Capital, and Swiss-based Ecoinvest Carbon SA listed as project participants.
Below is a breakdown of the figures by country.
By Ben Garside – firstname.lastname@example.org