16 Oct 2008 05:10:47
Emissions will shrink in downturn
Carbon emissions in the EU will drop as a result of a predicted contraction in the region's economy, according to Deutsche Bank analysts.
A research note from the bank claimed that a recession will reduce the industrial carbon dioxide emissions from existing installations by about 100 million tonnes in 2009 compared to 2007.
As a result, demand for emissions permits in the European Emissions Trading Scheme (ETS) would drop along with prices.
Under the ETS, the highest polluting industries such as electricity generation, mineral processing, iron and steel producers and pulp and paper processing have to buy permits to emit greenhouse gases.
A 'cap' is set on the total amount of emissions permitted from installations covered by the scheme.
The total amount is converted into allowances - one allowance is equivalent to one tonne of CO2 which are distributed to the installations.
Participating installations are obliged to show they have enough allowances to cover their emissions at the end of the year. During the year they can buy allowances from other firms or sell their own surplus.
The contracting economy has caused Deutsche Bank to revise its forecast price of allowances from 40 (£31) to 30.http://www.defra.gov.uk/environment/climatechange/trading...