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UBS Says EU Carbon Emissions Price May Triple by 2013 (Update1)
2010-09-22 10:42:53.519 GMT
(Updates with comment from report from second paragraph.)
By Catherine Airlie and Lars Paulsson
Sept. 22 (Bloomberg) -- UBS AG, the biggest Swiss bank,
said European Union carbon permit prices may almost triple by as
early as 2013 as natural gas recovers.
"UBS expects the gas oversupply to be gone by 2013," UBS
analyst Per Lekander in Paris said today in an e-mailed report.
"Should the gas price then revert to oil indexation parity we
could see a carbon price in excess of 40 euros a ton, almost
three times the current level."
The price of emission permits is driven by so called fuel
switching, where generators produce electricity from either
natural gas and coal, depending on which is most profitable,
according to the report. A gas market recovery by 2013 may boost
the price of the commodity by 16 percent, leading to a fuel
switching cost of 42 euros a ton, Lekander said.
The expected higher emissions price will impact power
markets and prices may rise 15 euros ($20) a megawatt-hour if
gas markets fully recover, he said. The 2013 contract in
Germany, Europe's biggest market, traded at 54.45 euros
yesterday, 5.05 euros more than the next-year contract,
according to broker prices on Bloomberg.
Coal and gas forwards indicate that carbon prices could
double by 2014, assuming "no recovery at all in gas prices
until 2013," Lekander said. "The reason for this anomaly is
lack of liquidity in the CO2 forward curve beyond 2011."
EU permits for December rose 8 cents, or 0.5 percent, to
14.99 euros a metric ton at 11:35 a.m. on London's European
Climate Exchange. The EU trading program is the world's largest.
UBS said Fortum Oyj, Finland's biggest utility, and
Electricite de France SA are the "likely main winners" from
rising emission and power prices because they generate virtually
all their electricity from fossil-free generation. Public Power
Corp., Greece's biggest power company, may be "the largest
loser."
For Related News and Information:
Top Power Stories: PTOP <GO>
Emissions-trading stories: NI ENVMARKET BN <GO>
Today's top energy news: ETOP <GO>
European power-markets home page: EPWR <GO>
To contact the reporter on this story:
Catherine Airlie at +44-20-7073-3308 or
cairlie@bloomberg.net
Lars Paulsson in London at +44-207-673-2759 or
lpaulsson@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
