LONDON (Reuters) - European carbon permit prices will rise by some 10 percent to average 14 euros ($20.07) a tonne in 2010 as companies begin in H2 to hedge a permit shortfall set to arise in 2013, Barclays Capital said on Thursday.
EU Allowances, the carbon emissions permits traded under the 27-nation bloc’s Emissions Trading Scheme, will average 12 euros a tonne in Q1, said Trevor Sikorski, BarCap’s director of carbon markets research, raising his previous target by 50 cents.
EUAs, which currently trade around 12.70 euros, will then rise to 15 euros in the second half of 2010 as utilities begin buying to ease the expected supply shortfall in the scheme’s third phase (2013-2020), Sikorski said.
He added that EUA prices will then average 18 euros and 24 euros in 2011 and 2012 respectively.
In Phase 3, EUA supply will be tightened annually to lower the EU’s greenhouse gases, resulting in a 21 percent cut in industrial carbon emissions by 2020 below 1990 levels.
Phase 3 EUA prices will average 40 euros a tonne, he said.
BarCap forecast the economic downturn will cut 2009 EU industrial output by 15 percent and EU power demand by 8.5 percent, drops which would slash the bloc’s carbon emissions and foster a surplus in EUAs.
As a result, Sikorski predicted an excess in EUAs of 129 million tonnes for 2009. He said this surplus will shrink to 54 million tonnes by 2012, but he sees an overall surplus for Phase 2 (2008-12) of 224 million EUAs, or 45 million per year.
These permits will be banked for use in Phase 3, he added.
Kyoto Protocol offsets, or Certified Emissions Reductions (CERs), will average 11.50 euros in the first half of 2010, rising to 13.00 euros in the second, Sikorski said.
CERs, which mainly originate from clean energy projects in China and India and currently trade around 11 euros, will average 15 euros in 2011, 18 euros in 2012 and 25 euros in Phase 3, he added.
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Reporting by Michael Szabo