Is the EUETS working?

To a large extent the EUETS is working in the sense that the 1990 minus 20% target will be met. Why? In part due to the the ETS and also in part slowing economic growth. These are said to be the major drivers behind meeting the target.

So what is wrong? The oversupply of EUA has increased the supply to a point where prices have dropped. The current price according to point carbon surveys is such that carbon pricing is no longer part of an investment decision by emitters. In this sense the EUETS has failed and the regulator needs to reduce the supply of credits. Otherwise the emissions reductions achieved will only be temporary.

How do they do this? In the first place implement more stringent targets such as the 1990 minus 30% that has been mooted. The issue is to implement proper process this will take 18 months, and with Poland objecting may be longer. So an interim ‘set aside’ of some 1.6bn EUA – or some ‘significant number’ has been implemented.

The recent announcements of EU emissions data being less that projected for 2011 have further exacerbated a projected oversupply to 2020 and that has reduced prices to recent lows.

When will the EU regulator act to provide quantifiable measures to restore the carbon market so carbon returns to being part of investment decision making?

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