Azernews.Az

By Bloomberg

Europe’s carbon market remains at risk of being undermined by costly renewable-energy subsidies through 2030 even after Tuesday’s accord on a plan to curb a surplus of emission permits, according to Vattenfall AB.

The draft decision by lawmakers to advance the start of a proposed permit reserve by two years to 2019 is only the first step in rebuilding the market’s credibility, said Stefan Dohler, head of markets at Solna, Sweden-based Vattenfall, the largest Nordic utility. While the accord will prevent a year’s worth of surplus permits from hitting the market by 2020, follow-up laws are needed to protect the system for the next 15 years, he said.

“The market stability reserve is important, but not the only solution for reaching the 2030 target,” Dohler said Wednesday by telephone. “You need the path, and you need to know what role the emissions-trading system plays in the whole framework.”

EU carbon allowances have plunged 76 percent from 2006’s record high after overlapping climate policies and the bloc’s recession eroded demand. Tuesday’s agreement on the reserve culminated four years of policy-making.

“There’s a very fast impact of around 2 billion tons that will now not hit the market,” Dohler said. “It will be basically taken away. The market stability reserve is a very important stone in the wall, but the wall is not complete yet.”

EU benchmark carbon allowances settled down 0.3 percent at 7.57 euros ($8.58) a metric ton on the ICE Futures Europe exchange in London after earlier touching 7.75 euros, the highest level in for 10 weeks.