Markets calm as Italy told to trim CO2 plan

The EU’s carbon trading market reacted calmly yesterday (15 May) to a European Commission decision on Italy’s plans to allocate carbon dioxide (CO2) allowances under the Emissions Trading Scheme (ETS).

Italy was the 21st member state to have its National Allocation Plan (NAP) assessed by the Commission and the 18th to be asked for a cut in the number of emission permits it proposed for the ETS’s second-round of trading (2008-13).

Andreas Arvanitakis, senior carbon market analyst with Point Carbon, said: "I don’t think the market is expecting any big surprises for second-round trading now."

The Commission has now assessed all countries with high CO2 emission levels, including France, Poland, Hungary, the UK and the Czech Republic, explained the analyst. "These were the countries with the potential to move markets on the day their NAPs were assessed," said Arvanitakis.

All six big emitters singled out by Arvanitakis were told to reduce the number of emission permits allocated under their phase-two NAPs, with the exception of the UK. Italy has been asked for a 6.3% cut in allowances, bringing the tradeable total for 2008-13 down to 195.8 million tonnes of CO2.

Environment Commissioner Stavros Dimas has prided himself on taking a tough approach to the NAPs, after a majority of member states proposed raising their emission caps for large industry over the 2008-13 period.

"The second round trading price has been fairly stable at almost €20 for some time now," Arvanitakis said, "showing that the market as a whole is impressed by the Commission’s bullish attitude."

But Stig Schjolset at Point Carbon said Romania and Bulgaria could still cause short-term uncertainty in the market when their NAPs were assessed later this year. "The difference between these two and the other NAPs is that we have no verified emission data for 2005 and 2006 in Bulgaria and Romania," he said.

The EU’s carbon trading market reacted calmly yesterday (15 May) to a European Commission decision on Italy’s plans to allocate carbon dioxide (CO2) allowances under the Emissions Trading Scheme (ETS).