EU ETS emissions fell by around 4.5% in 2014, but despite supply-curbing reforms the market’s massive allowance surplus only dipped fractionally and still stood at 2.07 billion at the end of last year, the European Commission said on Monday.

Verified emissions of greenhouse gases from more than 11,000 stationary installations in 31 nations amounted to 1,812 million tonnes of CO2-equivalent in 2014, the EU executive said in a statement rounding up more complete data following preliminary results on April 1.

This was a lesser fall than the 5.5% decrease predicted by analysts ahead of the March-end reporting deadline. The closest of the seven analysts polled was Sandbag, at 1,814 million tonnes.

Fewer than 1% of the installations which reported emissions for 2014 did not surrender allowances covering all their emissions by the deadline of 30 April 2015.

“These installations are typically small and together account for less than 0.5% of emissions covered by the EU ETS,” the Commission said, adding that installations accounting for less than 0.2% of emissions the previous year did not report for 2014 at all.

The Commission said intra-EU aviation emissions rose 2.8% to 54.9 million tonnes in 2014, following compliance covering 99% of aviation emissions that included more than 100 operators based outside the EU.

Europe’s climate commissioner Miguel Arias Canete said the results showed carbon markets can deliver efficient emission cuts but the economic downturn of 2009 is still having an impact on the bloc’s cap-and-trade system.

“Even while our economies are getting back in the growth track, emissions continue to decrease. This once again shows that economic growth and climate protection can go hand in hand. This sends a powerful signal ahead of the new global climate deal to be agreed in Paris this December: carbon markets deliver cost-effective reductions. At the same time, the recession continues to have a lasting impact on our carbon market. I therefore warmly welcome the ambitious political deal on the Market Stability Reserve agreed by the Parliament and the Council very recently, he said.

SURPLUS REMAINS

The drop in emissions outpaced the ETS’s annual cap decrease of 1.74%, but the market’s cumulative surplus dipped by 30 million tonnes year-on-year and stood at 2.07 billion by the end of December.

This was due to 400 million allowances being withheld from auctions over the year via backloading, however, the impact of this was limited because companies opted to convert most of their remaining offset limit for 2014 compliance, leaving more EUAs were left in circulation.

EU ETS emitters converted some 255.64 million UN-backed carbon credits into EU allowances over the year to April, more than double the amount exchanged a year earlier.

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, which still represent the vast majority of credits in circulation globally.

EU emitters have around 125 million of their estimated 1.6 billion-unit limit remaining – or roughly 21 million per year over the next six years.

By Ben Garside – ben@carbon-pulse.com