Carbon prices could triple, manufacturers warned

Next month, the EU will vote on proposals to withhold around 900 million EU Allowances (EUAs) from the scheme, in a bid to proactively raise the price of carbon. Business energy supplier Gazprom Energy, which provides carbon trading services to approximately 10% of the EU ETS market, has warned that the vote could leave some UK businesses exposed to considerable financial risks. The price of carbon peaked at €30 per tonne in 2008 but has fallen to €3.50, prompting criticism that the scheme is not encouraging energy-intensive businesses to reduce their emissions. Gazprom's Simon Watson said: "The market is subject to volatility which means participating businesses should always be focused on how they can maximise their positions. However, as the price of carbon has been depressed for a long period of time, some have felt little impetus to actively manage their exposure to the market." He added: "The risk is, if the vote is passed, we could see prices triple – considerably altering business' risk exposure, especially if they are forecasting the need to acquire additional carbon allowances during phase III of the scheme, which runs until the end of 2020. "The vote in July could be a game-changer for the price of carbon and any business exposed to the market should be reviewing their strategy in advance." The EU parliament is expected to vote on the backloading proposals between 1-4 July.