EU ETS surplus to remain high even with strong MSR -Sandbag

Published 15:06 on March 13, 2015  /  Last updated at 14:54 on May 11, 2016  /  EMEA, EU ETS  /  No Comments

The EU ETS will remain oversupplied by at least 2 billion EUAs through 2020 even if lawmakers agree a stronger MSR, according to environmental campaigners Sandbag in an update to their market forecast.

The EU ETS will remain oversupplied by at least 2 billion EUAs through 2020 even if lawmakers agree a stronger MSR, according to environmental campaigners Sandbag in an update to their market forecast.

Sandbag expect the current 2.5 billion EUA surplus to expand to 4.4 billion by 2020, down slightly from the 4.5 billion level it predicted last October.

They say even the EU Parliament’s strengthened MSR would only cut this surplus by 2.4 billion.

Even with the strong MSR, Sandbag don’t expect an increase in EUA prices from current levels of around €7, whereas analysts ICIS Tschach expect €35 in 2020, Thomson Reuters Point Carbon €18, and Bloomberg New Energy Finance €35 over 2021-2024.

Sandbag said its modelling projects EU CO2 emissions to be around 1.5 billion tonnes less over the next five years than levels predicted by other analysts, mainly because it expects electricity consumption ton fall at a faster rate.

It says electricity consumption will fall 10% this decade due to the use of more efficient appliances in offices and homes, whereas most analysts expect flat or slightly increasing power consumption.

Sandbag’s Dave Jones said national governments wary of higher carbon prices crimping economic growth had little to fear from the MSR they are currently negotiating how to implement.

“Policymakers should not be timid about bringing in the MSR as early and as strong as possible: as it stands the carbon price is very unlikely to become expensive. The carbon price has actually fallen from €7.80 to around €6.60 since the (EU Parliament’s MSR) vote, despite most analysts forecasting the price will rise.”

By Ben Garside – ben@carbon-pulse.com