Global Carbon Price Unlikely For 10-15 Years: Analysts

Nina Chestney, PlanetArk 19 Mar 09;

COPENHAGEN - A single global price for carbon emissions is not likely for another 10 to 15 years because governments are dragging their heels on legislation, market analysts said on Wednesday.

"By 2025, we could have one single currency," orbeo carbon analyst Emmanuel Fages said at a Point Carbon emissions trading conference in Copenhagen.

The European Union's executive Commission hopes to have a global carbon market in which emissions trading schemes are linked by 2020. It wants to see national schemes in all OECD countries by 2013 and for those to be linked by 2015.

Cap-and-trade schemes force participants, often energy-intensive industries, to buy permits to emit greenhouse gases such as carbon dioxide, which is produced from burning fossil fuels.

Analysts said a global carbon market would help achieve real emissions cuts in planet-warming greenhouse gases, but the EU's goals were too ambitious and a global price for carbon would only emerge in 2015-20.

"The big issue is the Commission wants to link with the U.S. by 2015. That looks incredibly ambitious," Trevor Sikorski, an analyst at Barclays Capital, said.

Schemes around the world include a regional scheme in the United States called the Regional Greenhouse Gas Initiative and a voluntary market in Japan.

Australian emissions trading is set to start in 2010 despite a government inquiry and growing opposition to the scheme. Canada is also aiming to launch one in 2010 even though it lacks government legislation. New Zealand has put carbon trading plans on ice after the election of a new government late last year.

A U.S. cap-and-trade bill is being negotiated, with carbon permit auctions by government expected to start from 2013.

In his latest budget proposals, U.S. President Barack Obama expects to generate some $646 billion in revenues from these auctions between 2013 and 2020.

TOO MANY HURDLES?

Linking the schemes in different countries would be complicated but it is thought a single market would help drive deeper emissions cuts and lead to more investment in renewable energy.

The participation of the United States, the most polluting developed nation, would be crucial to achieve a global emissions market, market analysts said.

Legislation will need to be sent to the U.S. Congress within the next few months to stand any chance of being enacted in time for regulators to draw up scheme details by 2012, analysts said, adding that even when the scheme emerges and can be linked to other schemes, there will still be hurdles to overcome.

"Price expectations under a U.S. scheme are fundamentally different to what you expect for the EU. European prices will likely be higher," Sikorski said. "So if the schemes were linked by 2015, that would mean a one-way flow of (carbon permits) from the U.S. to Europe."

The United States could also seek to use a global market to its own advantage.

"The U.S. will seek to reserve the right to change its mind over things. There is a risk of the U.S. increasing or decreasing (offset) imports via linking with the EU. Rather than complete convergence, I rather see a high correlation among carbon assets," said Will Babler at First Capitol.

(Editing by Michael Szabo and Sue Thomas)