Surplus of CO2 emission less costly for energy companies

13/01/2011 15:00

Energy companies generated more electricity in 2009. As a result, CO2 emissions have grown relative to 2008. To cover excess emissions energy companies have to buy extra emission rights. The price of emission rights has fallen considerably in 2009, so companies had to pay less for the surplus pollution than a year ago.

Buying extra emission rights

In 2005, the European CO2 emission trade was launched. Serious polluters like energy companies are obliged by law to participate in the European Emission Trading Scheme (ETS). They must account for their CO2 emissions on an annual basis and if they exceed their emission limits, they had to buy the extra emission rights on the European market for emission rights from the Dutch Emission Authority.

Dutch energy companies have received free emission rights for 37.7 million tons of CO2 in 2009, but the emission volume was considerably higher. As a result, there was a shortage of emission trading rights in 2009. This was also the case in 2008. Energy companies had to buy extra emission rights on the European emission rights market to cover the shortage of 9.4 million tons of CO2.

Shortage and surplus of CO2 rights of Dutch companies, 2009

Shortage and surplus CO2 rights of Dutch companies, 2009

Extra CO2 emissions due to growing exports and reduced imports of electricity

Due to the economic recession, electricity consumption was reduced in the Netherlands in 2009. Yet, Dutch power stations generated more electricity and CO2 emissions were higher. More electricity was generated, because less electricity was imported from abroad and more electricity was exported.

Changes on the electricity market, 2008 - 2009

Changes on the electricity market, 2008 - 2009

Recession puts prices emission rights under pressure

The emission rights market is under pressure as a result of the economic crisis. Due to a decline in output of manufacturing, the demand for emission rights was reduced to a lower level in 2009, putting emission right prices under pressure. The price of extra emission rights energy companies had to buy in 2009 was significantly lower than one year previously.

Prices CO2 emission rights (futures)

Prices CO2 emission rights (futures)

Cor Graveland and Maarten van Rossum

Source:

• Environmental Accounts of the Netherlands 2009, hoofdstuk 14. CO2 Emission permits