London, 9 March 2011

Deutsche Bank on Monday lowered both its 2010 CO2 emissions forecast and its EUA price projection for 2011 due to lower-than-expected emissions from power plants and weak profit margins for generators. The bank slashed 14 per cent off its price forecast and expects EU allowance prices to end the year at €18 in 2011, €3 lower than its previous estimate.

The bank said it also expects the European commission next month to publish data revealing that installations covered by the bloc’s emissions trading scheme (ETS) emitted 1.922 billion tonnes of carbon dioxide in 2010, down 28 million on its previous estimate.

The bank’s estimate is a 2.6 per cent increase on emissions in 2009 and is 6 million tonnes lower than estimates from Thomson Reuters Point Carbon analysts, who last month said emissions would total 1.928 billion tonnes.

“The power sector is by far the largest single source of emissions in the ETS, and in 2010 we estimate that its emissions will show a modest increase of 22 million tonnes or 1.5 per cent,” the report said.

The bank expects emissions in industrial sectors, such as metals, cement, refining, ceramics and paper and pulp, to have increased a total of 6 per cent in 2010.

“The strongest performer was the iron-and steel sector, where year-on-year output was up 24 per cent. Accordingly, we assume an increase in emissions for this sector of the same amount, and see 2010 emissions at 119 million tonnes (versus 96 million in 2009).”

The bank expects emissions from cement to have increased 2.6 per cent in 2010 and refining 0.8 per cent year-on-year, while for the other industrial sectors the bank said it estimates that emissions increased 10 per cent.

On prices the bank said that poor profit margins at German power plants means that power companies would be hedging power sales with carbon purchases far less than previously expected.

“With clean dark and spark spreads in the German power market still at very depressed levels, we do not expect to see German generators selling significant volumes of electricity forward for 2013 delivery in the near term," the bank said.

"As a result, we have downgraded our year-end 2011 forecast for EUAs to €18/t, whilst keeping our forecasts for 2012 and beyond unchanged,” it added. 

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