LONDON (Reuters) - Germany's plan to shut all its nuclear power plants by 2022 will add up to 40 million tones of carbon dioxide emissions annually as the country turns to fossil fuels, analysts said on Tuesday.
The extra emissions would increase demand for carbon permits under the European Union's trading scheme, thereby adding a little to carbon prices and pollution costs for EU industry.
"We will see a pick-up in German coal burn," said Barclays Capital analyst Amrita Sen. "Longer term, they will be using more renewables and gas but this year and next, we should see a lot of support for coal burn."
The phase-out is seen as more political than technical as German Chancellor Angela Merkel tries to capture anti-nuclear sentiment in the aftermath of Japan's Fukushima crisis.
Environmentalists welcomed the shift, although some demanded a faster phase-out, hoping it would spur a shift to renewable energy which they view as less harmful by avoiding radioactive waste.
But analysts say the move will also see an increase in planet-warming greenhouse gases equivalent to the annual emissions of Slovakia, as Germany uses gas and coal to plug a power generation gap, both of which are more carbon-emitting than nuclear power.
That calculation implied some skepticism with the coalition's assertion it would cut power demand and expand the use of renewables such as wind and solar power.
Deutsche Bank analysts estimated an extra 370 million tones of carbon dioxide (CO2) emissions through 2020, compared with Societe Generale's extra 406 million tones.
Matteo Mazzoni, analyst at Italy's Nomisma Energia, estimated an extra 20-29 million extra tones of CO2 per year.
"This is not likely to drive prices much higher in the medium term, unless the price of power comes under pressure," Mazzoni said, referring to the price of emissions permits called EU allowances (EUAs).
Socgen analyst Emmanuel Fages increased his third quarter 2011 EUA price forecast by a modest 0.5 cents to 17 euros per tone, and would reassess other prices.
The benchmark EUA contract for December 2011 delivery was trading at 17.24 euros ($24.63) per tone Tuesday lunchtime, up 35 cents or 2 percent on the day.
"Carbon prices should obviously also get an uplift due to the sentiment born from the decision, but it will be limited and temporary," Fages said, adding "The market remains largely oversupplied (EUAs) for two years to come, capping any significant price increase in the short run."
The EU trading scheme is meant to limit industrial emissions by allocating a fixed quota of EUAs to some 12,600 factories and power plants but recession in 2009 left a glut of permits.
Writing by Gerard Wynn; editing by James Jukwey