Budapest-based consultants Vertis Environmental Finance has changed its market outlook to "perplexed" after the European commission ruled that German companies will be allowed to surrender Kyoto project credits up to 22 per cent of their EU carbon permit allocation, it said today.
The decision means a big change in the fundamentals," said Gergely Szabo, head trader at Vertis.
The company said it expected a shortage of between 100 million and 200 million EU allowances per year of the 2008-2012 second trading period of the EU emissions trading scheme (ETS), measured against actual CO2 emissions.
However, while Vertis previously had estimated an import capacity of around 230 million credits per year, the decision to allow Germany to up its limit from 12 per cent to 22 per cent will increase the annual import capacity to 280 million.
Through investing in emissions reductions projects in developing countries or in other industrialised countries, companies covered by the EU ETS receive certified emissions reductions (CERs) or emissions reduction units (ERUs), which offer a cheaper alternative to purchasing EU allowances from other EU companies.
Germany, the biggest emitter in the EU, in December last year notified the commission it intended to increase the credit limit, and the commission approved the change on 26 October.
"We see Mrs Merkel in the news urging the Indians to do more about GHG emissions. At the very same time the Germans fire a torpedo at their own NAP and blow a new hole in the EU ETS," said James Atkins, Chairman of Vertis.
"Are RWE and Eon shareholders somehow more important than the remaining 6 billion people on the planet?"...MORE
I'm thinking we've found our Climateer Quote of the Week.