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The second period of the European CO2 emissions allowance trading scheme began on January 1, 2008, and will last until the end of 2012. Framework conditions are much less favourable for power producers, compared with the first trading period from 2005 to 2007. In the past, the number of allowances allocated by the state exceeded overall actual emissions originating from the plants participating in the EU emissions trading scheme. This stopped being the case in 2008, since the national allocation plans for the second trading period envisage reductions in state allocations, some of which are substantial. As a result, many utilities will have to obtain a great number of certificates.
Development of CO2 certificate prices in the European emissions trading system in €/metric ton of CO2
The anticipated scarcity of available emissions allowances compared to the first trading period is reflected in their market price. Whereas certificates for 2007 traded at just a few euro cents per metric ton of CO2 at the end of the first trading period, certificates for 2008 sold for an average of €22 in the period under review. It is important to note here that surplus emissions allowances could not be carried over from the first to the second trading period. An increasing number of Certified Emission Reductions (CERs) are currently being generated. These are certificates obtained from emissions reductions achieved in developing and newly industrializing countries within the scope of the Clean Development Mechanism Glossary. European companies may cover domestic emissions up to a predetermined level by submitting CERs. The advantage is that the costs for these types of certificates are usually lower than the market prices of state-allocated emissions allowances. Last year, 2008 CERs traded at an average of €17 per metric ton of CO2.
