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EU Emissions Trading Scheme Entering Crucial Period
of
True Price Discovery
LONDON, UK, May 1, 2006 - Last week, several European
Union (EU) member state governments began publishing their
compliance reports of verified emissions from installations
covered under the EU Emissions Trading Scheme (EU ETS).
So far six countries, representing 28 percent of emissions,
have reported and all are required to do so by May 15,
2006. In response, the price of EU Allowance (EUA) was
cut in half from more than 30 euros/tonne to around 15
euros/tonne, causing some implications for participants
in the carbon market.
"Contrary to some media reports, ICF International
believes that recent EUA price developments indicate the
market is working exactly as it should. The market is responding
to clear signals of lower than forecasted emissions in
the few countries that have reported so far," said
Abyd Karmali, Managing Director of ICF
International's London office. "The key unknown
for the market is whether the high EUA price in recent
months has stimulated some emissions abatement in industry
sectors, or whether the lower reported emissions are purely
the result of companies successfully gaming the allocation
process. From our own experiences working on climate
strategy with several large emitters,
we believe that companies are indeed uncovering innovative
ways to reduce emissions but there also has unquestionably
been some over-allocation to the industry sectors given
the lax methodologies used by some governments in their
National Allocation Plans."
"In our view, there will still be an overall shortage
in the market at the end of the first trading period because
the European power sector has experienced a significant
increase in the spread between natural gas and coal prices," added
Kim Keats, Director of power and fuels in London. "The
overall shortage in the power sector should still outweigh
any net long position in the other industry sectors. Based
on our experience of other cap-and-trade emission control
schemes, we have consistently warned market participants
to expect prices to remain volatile during this first phase
of the EU ETS as immature markets tend to be hypersensitive.
Price and quantity discovery will take time."
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ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.
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For Immediate Release
United Kingdom Contact: Abyd
Karmali
Tel: 44 (0) 20.7092.3005
United States Contact: Stacey Hohenberg
Tel: 1.571.438.8106
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