Friday, January 30, 2009
EU Carbon Market- :"Only real price floor is Zero"
Just what I have been afraid of. In this Bloomberg article this morning, UBS states that emission permits may reach record lows, and even becoming worthless in absolute terms. The EU emissions market has suffered setback after setback, as each time a price level was set, the market devalued further. However, there is a silver lining for the US, as the new administration has emission mandates in the works. The collapse in oil prices notwithstanding, price targets for emission products were established at a level too high for participants from the outset, and the result is what we see today. Reasonable expectations on the initial targets will be key, and once participation becomes common and there is liquidity in the market, it is the market that will ultimately decide where price per ton should reside.