Missing the methane

28 Apr 2006 By Edward Hadas

It s a fair question after the price of emission permits fell by 50% in three days. It turns out Europeans aren t as gassy as expected. Some hedge funds are smarting, and some utilities might look less valuable. But the market serves a real need. It shouldn t disappear.

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The price of a permit to emit one metric tonne of carbon in the EU for 2006 fell from E30 on Monday to E14 on Friday morning. The decline was caused by announcements from France, Netherlands, Belgium and the Czech Republic that carbon emissions in 2005 had been less than budgeted for when emission permits were granted. The rest of the EU members must report 2005 emissions by May 15.

The EU allocated permits on a national basis for 2006 and 2007. These were given to companies that emitted significant amounts of carbon, which were allowed to include them as assets on their balance sheets. New allocations will be granted in 2007 for the remaining years of the Kyoto protocol, 200812.

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