In recent years the EU Emissions Trading System (ETS) has been characterized by a surplus of allowances mainly because of an over allocation at the beginning of the ETS and the influence of the economic crisis. The very low price of CO ² resulting from this situation is not sufficient to favor gas against coal for power generation. This situation has undermined the orderly functioning of the carbon market foster- ing, indirectly, the use of more carbon intensive fuels such as coal.
10 9 €/EUA
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Figure 4.7: Evolution of European spot prices for emission rights for the period November 2012 – November 2014 (Source Data from EEX, ENTSOG depiction)
The first trading period from 2005 – 2007 was characterized by an oversupply of allowances as real emissions were lower than expected, hence prices fell to almost zero at the end of the first period. In the second period from 2008–2012 the yearly amount of certificates decreased but prices still remained low. Since the start of the third period in 2013, the yearly amount allocated has decreased and will continue to decrease until the end of the period in 2020. Even with this improvement, current emission prices range around 7€/EUA 1) which does not seem to be an appropriate price level to incentivize an effective cut of carbon dioxide emis- sions and hence an actual mitigation of climate change effects. After 2020 the annual linear reduction factor which determines the EU ETS cap will further increase from the current level of 1.74% to 2.2%. This should increase the upward pressure on the CO ² price, which is necessary to achieve the environmental targets in a sustainable manner.
126.96.36.199 Split by country ( last 5 years )
Figure 4.8 contains information on actual gas consumption over the last five years across Europe. When identifying trends it should be considered that data are not climate adjusted and that 2010 was a particularly cold year.
1) EUA stands for “EU Allowance”. One EUA is the minimum trading unit and enables the owner to emit one ton of CO ² equivalent (definition of EEX).