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|01 April, 2019

EU carbon market emissions fell 3.3% in 2018 as renewable power rose

Power sector emissions down 6.4%

European Union flags fly outside the European Commission headquarters in Brussels, Belgium, March 6, 2019.

European Union flags fly outside the European Commission headquarters in Brussels, Belgium, March 6, 2019.

REUTERS/Yves Herman

LONDON - Emissions regulated under Europe's carbon market fell by 3.3 percent last year as renewable energy increased, data published on Monday by the European Commission and analysed by Refinitiv showed.

Around 45 percent of the European Union's output of greenhouse gases is regulated by the Emissions Trading System (ETS), the bloc's flagship policy to tackle global warming by charging for the right to emit carbon dioxide (CO2).

The Refinitiv carbon analysts' interpretation of the data found emissions covered by the scheme totalled 1.757 billion tonnes of CO2 equivalent (CO2e), which was down by 3.3 percent on the previous year.

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The fall was largely due to a drop in emissions from power generation as coal-fired output was replaced by gas-fired generation, which emits half the amount of carbon dioxide, and by carbon free renewable power.

"Rapid growth in renewable deployment across Europe continues to squeeze out coal in the power sector", said Yan Qin, senior modelling analyst at Refinitiv.

Emissions from power and heating generation fell by 6.4 percent, while emissions from industry fell by 1.5 percent.

However, emissions from the aviation sector rose by 5.7 percent in 2018 as more flights took place, the analysts said.

Under the ETS, airlines have to report emissions for all flights that begin and end within the EU.

The ETS caps the emissions of around 12,000 power plants, factories and airlines, forcing them to surrender one carbon permit for every tonne of carbon dioxide emitted annually by the end of April of the following year.

The data published on Monday accounted for 95 percent of companies covered by the scheme, the analysts said.

The emissions figure is keenly watched by participants in the EU's ETS as it provides an indication of the supply and demand balance in the market.

A strong fall in emissions is typically bearish for the carbon market as it means companies covered under the ETS need to buy fewer permits.

The benchmark EU carbon contract CFI2Zc1 traded at 21.25 euros/tonne at 1130 GMT, down 1.4 percent from the previous close.

(Reporting by Susanna Twidale, editing by Louise Heavens, Jan Harvey and Alexander Smith) ((susanna.twidale@thomsonreuters.com; +44 207 5424753;))

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