London, November 28, 2007

Deutsche Bank's price forecast on EUAs reinforced by EU Parliament's suggestions on aviation CO2 Emissions


In a report published today, Deutsche Bank has reiterated a bullish forecast for European Unit Allowances (EUAs) after analysing the likely impact of the EU Parliament's proposals for including aviation in the EU's carbon -trading scheme.

Mark Lewis, Director of Global Carbon Research at Deutsche Bank, who wrote the research report found that:

  • If adopted in full, these proposals would result in a two-tier EU carbon market, which is contrary to the goal of establishing a uniform carbon price, and may result in the cost of European Airline Allowances (EAA) being significantly higher than the cost of standard European Unit Allowances (EUA).
  • For this reason Deutsche Bank does not expect the European Commission to accept all of the proposals, and in particular expects the proposed limit on the use of EUAs by the aviation industry to be rejected. As a result, Deutsche Bank’s base-case scenario is now assuming higher demand for EUAs over both Phase 2 and Phase 3 of the ETS as the aviation industry enters the scheme.
  • The proposals themselves, although unlikely to be accepted in their entirety, signal a radicalisation of the debate over the future of the Emissions Trading Scheme (ETS) at a crucial time given the European Commission's forthcoming review of the ETS.
  • The European Commission is due to outline changes to the framework of the ETS for Phase 3 in January 2008. With the increased demand for EUAs from airlines, combined with the tight emissions cap expected for Phase 3 and the bankability of Phase 2 permits into Phase 3, Deutsche Bank reiterates its bullish position with a price target of E35/tonne for 2008.

For further information or a copy of the research, please call:

Deutsche Bank

Stacey Coglan   +44 (0) 207 545 8226
Press and media relations

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