Carbon prices dropped by more than 50% last week upon reports that the Czech Republic, Estonia, France, the Netherlands and the Walloon region emitted far less CO2 last year than initially anticipated by the market.
Low carbon prices are bad news for the EU's climate change policy as the CO2 trading scheme draws its strength from the benefits companies can make from selling their potential surplus pollution allowances on the market. With falling prices, incentives for companies to cut down their emissions and free up extra credits are consequently diminished.
The reported CO2 emissions represent only about 15% of the total emitted in the EU with reports for the biggest emitters like Germany, Italy, Poland and the UK still pending. The Commission will publish full emission statistics for the entire EU on 15 May.
The news took the market by surprise because of the magnitude in the discrepancy between the caps placed on countries' emissions and the amount of CO2 actually emitted. The shortfall was as much as 25% in Estonia with other countries reporting between 8 and 15% fewer emissions than anticipated. In France, this amounted to 19 million tonnes surplus allocations, authorities said.