Emissions regulated by the EU ETS fell by 5.5% in 2014, according to an average of seven analyst estimates compiled by Carbon Pulse.

The mean of the collected estimates show emissions excluding aviation declined to 1.803 billion tonnes in 2014, despite an 1.3% increase in GDP across the 28-nation EU bloc.

This emissions drop vastly outpaced the annual decrease of the overall ETS cap, which reduces by 1.74% below 2012 levels each year between 2013 and 2020.

The estimates come ahead of the European Commission’s publication of preliminary 2014 emissions data on April 1, the first official indication of annual market balance.

The ETS regulates around half of Europe’s greenhouse gas emissions and by the end of March over 12,000 power plants, factories and airlines in 31 countries must surrender enough EU Allowances and UN offsets to match their emissions for the previous year.

The analysts said the emission drop was mainly due to a major fall in electricity production as warmer-than-average winter temperatures cut demand for heating.

Some analysts said this would be partly offset by slightly higher output by recuperating heavy industry, coupled with a steady increase in the bloc’s electricity generated from emission-free renewable, as more capacity came online.

“A large 6.7% decrease in power and heat emissions drove the reduction in EU ETS emissions last year. Meanwhile, glimpses of an economic recovery meant that production increased in several industrial sectors, which according to our estimates led overall industrial emissions to increase slightly by 0.5%,” said analysts at Thomson Reuters Point Carbon.

They expect domestic aviation emissions covered by the ETS to be down 2.1% to 55 million tonnes.

However, analysts at ICIS Tschach don’t expect the downward trend to last and are predicting total ETS emissions to increase by around 60 million tonnes this year.

“Last year featured some really exceptional weather conditions that were the main reason behind the drop,” said Tschach’s Phillip Ruf.

LITTLE PRICE IMPACT

The annual data publication has become less important for predicting carbon price movements as a massive surplus of more than 2 billion EUAs has built up, as rigid rules have kept supply constant as demand collapsed from 2008 due to the economic downturn.

Analysts base their price forecasts on assessing what prices will entice industrial companies to sell their surplus units, on the rates of hedging forward power sales by utilities that determine their buying patterns, and by predicting speculator reactions to lawmaker efforts to shrink the surplus.

That said, prices jumped by as much as 10% following the publication of the data last year, after traders reacted to confusion over the vast difference between the raw figures and analyst expectations.

Analysts said the data had initially appeared skewed by a change in the classification of some sectors as the scope of the scheme was widened in 2013 to include new EU member Croatia and new sectors such as aluminium and bulk organic chemicals.

The European Commission will publish the verified emissions data at 1200 CEST (1100 BST, 1000 GMT) on April 1, giving full access irrespective of the amount of data that have been submitted.

It will also cover 2014 and 2013 verified emissions data for aircraft operators operating intra-EU flights, which were given an extra year to submit data following changes to the regulation that excluded flights into and out of Europe.

Only on May 4 will the EC grant access to data showing the number of UN offsets surrendered for 2014, the final year in which pre-2013 units can be used in the scheme.

Below is the table of analyst estimates for 2014 ETS emissions, excluding aviation, and the percentage change from previous years:

*Markedskraft % change is using its comparison of 1895 mt emissions in 2013

By Ben Garside – ben@carbon-pulse.com