Tag Archive: permits

Capital Alternatives Implications of Restricting EU Emission Permits

EU ETS system was launched in 2005 and it works on “cap and trade” principle, which is intended to reduce carbon emissions, and this is one of the biggest international schemes of carbon credits trading which gives carbon emission allowances. By the end of each year, the total number of allowances is surrendered by the company to cover its emissions, otherwise, the company is liable to pay penalty. The company having reduced carbon emissions can sell the allowances to another company.

The European Union countries are planning to restrict UN carbon emissions permits post 2012, which will limit the sales and reduce the revenue generated from excess rights. The matter will be discussed in the 27-nation bloc meeting of environment minister and this will threaten the global climate protection goals and will also build the internal EU talks during the 2011 UN climate summit.

At the UN climate talks in Durban in South Africa, EU agreed to make use of emission-cutting under the second Kyoto commitment period. Currently, the UN sponsored carbon emissions rights (also known as called Assigned Amount Units as per Kyoto Protocol), will end in 2012, and at the UN climate talks the EU agreed to accept new binding carbon emission cutting targets. According to the technical paper released by the European commission on Feb. 15, the lack of limits on carbon emissions permits will not have any impact on the environment but the unrestricted banking will undermine climate benefits.

At a meeting of senior diplomats in Brussels, some countries of eastern and central European countries opposed the restrictions on permits post 2012, and some countries such as Germany and Netherlands wanted to implement strict limits on permits.

The EU aims to cut carbon emissions by 20% by 2020 as compared to the levels of 1990 and the debate of the ministers of the 27 nation bloc will resume on March 9 .The aim is to build an internal EU talks which limits carryover of the UN permits.

The carbon price would rally significantly

The highest amount of carbon credit demand is driven by the Emission Trading System and EU has been trying to force its position in the future carbon market. According to Portuguese Espirito Santo Investment Bank, the price of European Union emission permits will become double by the end of the year, if the plan to restrict permits is passed.

Currently, the trading is set around 9 Euros and EU politicians are backing the proposal to withhold carbon permits, which will create the way for EU commission to state that low price has been caused by oversupply, which has been a major fear of the Euro zone. The price will be at least in the range of 15 to 20 Euros.

The proposal has been introduced but it needs approval from the EU parliament, and it also raises the questions of how many permits can be limited, and how and when the restrictions can be implemented. Will it be a temporary measure or a permanent step? It is believed without additional restrictions, the market will create a surplus and it will collapse the price of carbon credits, which will undermine the proposed rationale behind introducing the scheme.

Investing in forestry projects to earn carbon credits is an alternative investment methodology, which helps to earn carbon credits for personal use and for trading at the voluntary market. Companies can invest in Agro- forestry projects in Brazilian rainforests, Gola rainforests and Australian forestry projects to earn and trade carbon credits. Astonishingly profitable deals are offered by leading investment venture Capital Alternatives in Sierra Leone, Brazil and Victoria in Australia.

Capital Alternatives Invest in UK