(EnergyAsia, September 4 2012, Tuesday) — Australia is unlikely to achieve the government’s model carbon price of A$29 a tonne by 2015 from linking it to Europe’s emissions market, said carbon analysis firm RepuTex. (US$1=A$0.98).
The company gave this assessment in response to the announcement by Australia’s Minister for Climate Change & Efficiency, Greg Combet, that the country’s emissions trading scheme will establish an interim link with the EU’s.
Paul Bourke, RepuTex’s associate director of research, said:
“What price Australian buyers will pay for European Union Allowances (EUAs) will now depend on policy decisions to be made in Europe, not Australia.
“At present, we project a European price of approximately A$12 from 2013, in effect maintaining the same price level at which the Australian floor price was to be set. Should market reform take place in Europe in the form of a ‘set aside’ of excess allowances, we anticipate that EUA prices could recover to around A$18 in 2020, or upwards of A$23 should abatement targets in that market become more ambitious.”
At these levels, Melbourne-based RepuTex expects prices to fall well under current Australia’s Treasury estimates that the carbon price will reach A$29 per tonne by 2015.
The company also expect Australia’s carbon emissions to exceed the country’s cap by 73 million tonnes in 2015-16 and 155 million tonnes in 2019-20.
“Allowing firms to import carbon credits to meet up to 50% of their total liabilities will see Australian compliance buyers demand 36.5 million tonnes from overseas markets in 2015-16 and as much as 77.5 million tonnes in 2019-20,” said RepuTex.
Given that low prices for international Certified Emission Reductions from the Clean Development Mechanism and EU Allowances (EUA) from Europe are set to continue for the foreseeable future, RepuTex expects firms will make full use of the quota of international units up to the new sub-limit of 12.5%.
The European Commission has proposed a ’set aside’ to increase the price of permits in Europe, which is oversupplied by as much as one billion tonnes to 2020.
Depending on the volume of the EUA set-aside, currently thought to be between 400 million and one billion allowances, the measure might lead to EUA prices recovering to around 15 tonnes of carbon dioxide equivalent (t CO2-e) in 2020, said RepuTex.
Or if, in 2015, the EU moved to an abatement target of 30% on 1990 levels, the market could tighten by around 1.2 billion tonnes which could see prices recover to an average 19 t CO2-e towards the end of Phase 3.