Carbon markets have settled this week, but remain vulnerable to further political shocks from Germany’s nuclear policy and attempts at revolution in several Arab countries.
EU allowances (EUAs) for December 2011 delivery trickled down from a strong close on Monday at €17.30 ($24.58) and were trading either side of €17.00 on Wednesday. “The market was sold off on weaker power and weaker coal,” said a bank trader based in London. But the upwards trend resumed today, with EUAs peaking at €17.34 around lunchtime.
A massive gain for the Greens in elections on Sunday in the German state of Baden-Württemberg sparked a surge in EUAs - used by emitters in the EU for compliance with the Emissions Trading Scheme - when the markets opened the following day, as participants interpreted the election result as negative for the continuing use of nuclear power in the country.
“The regional elections have confirmed the trend towards less nuclear power generation in Germany that was already anticipated,” said Kathrin Goretzki, carbon analyst at UniCredit bank in Munich. There is strong opposition within the German population to nuclear power and there is a good chance that the seven plants temporarily shut won’t come back, she said. Some analysts expect the permanent withdrawal of eight stations, representing 8.7GW.
The lifetimes of Germany’s other 10 plants are in question and a decision will partly depend on how the situation at the damaged reactors in Japan is resolved, Goretzki said. Nuclear capacity is expected to be replaced by emissions-intensive coal plants, raising demand for carbon.
Meanwhile, the uprisings in the Middle East, particularly Libya, continue to play on crude oil prices which in turn influence the price of European energy commodities including carbon. With no swift resolution in sight, carbon remains at risk from further developments, analysts warned.
By. Christopher Cundy