PARIS, May 20 (Reuters) - The low price of carbon is an indication that the market does not believe European Union politicians will take the necessary measures to fix the carbon market, the chief executive of German utility RWE said on Wednesday.
EU diplomats last week approved a proposal to begin reforming the world’s biggest carbon market in 2019, with a view to begin removing some of the huge surplus of carbon allowances that has depressed prices on the EU’s Emissions Trading System (ETS).
The plan needs to be signed off by EU environment ministers in June and voted on by the European Parliament in July, but carbon prices are not anticipating a major impact from the plan and have remained stubbornly low at around 7.4 euros per tonne.
“We started with the ETS 10 year ago, but we are not getting our act together,” RWE’s Peter Terium said at the Business and Climate Summit in Paris.
Terium, who said his company is Europe’s largest CO2 emitter with 165 million tonnes of emissions per year, said the EU is not getting alignment on solving the ETS issue.
“The market does not believe it is going to happen because CO2 prices are still at an all-time low,” he said.
He added this is a signal the market does not think politicians are able to get the number of carbon certificates to be put up for auction in line with the need to get a sensible carbon price.
Terium said RWE aims to reduce its emissions by 25 pct by 2020 compared with their level in 2005.
“Over a period of 15 years 25 percent might not sound like a lot, but on a volume of 165 mln tonnes of CO2 it will eventually make a difference,” he said.
Terium estimated RWE might be the world’s second-biggest CO2 emitter. “That is not something to be proud of; the question is what do you do to change this,” he said.
He said that if RWE were to shut its lignite and coal-fired power plants, the company would go bankrupt, lights would go out in Germany and Europe and electricity prices would double or triple for chemical, steel and other companies.
He said RWE was investing heavily in reducing its CO2 emissions and in renewable energy and was developing new utility industry business models and smart grids that help consumers connect their solar panels to the power networks. (Editing by David Holmes)