July 25, 2007

The European Union wants to cut Carbon Emissions by 20% by 2020, Deutsche Bank significantly upgrades Carbon Price Forecast

Deutsche Bank has released new research entitled “Carbon Emissions: Banking on Higher Prices: We See EUAs at E35/t Over 2008-20” which looks in detail at the dynamics of Phase 3 of the European Trading Scheme (ETS), and the impact this will have on Phase-2 Prices.

Mark Lewis, Director of Global Carbon Research at Deutsche Bank, who wrote the research report commented, “The EU has a very ambitious target to reduce CO2 emissions by 2020 and wants to accelerate the deployment of CCS coal plants (coal plants that are equipped with carbon capture and storage technology) and renewables. These policy targets imply a very tough ETS cap from 2013 and a European Unit Allowance (EUA) permit price of E35/tonne over both Phase 2 and Phase 3.” He continues, “The banking of surplus EUAs between Phase 2 and Phase 3 of the ETS should ensure a common price across the period 2008-20.” 

Deutsche Bank estimates that the EU’s plan to reduce CO2 emissions by 20% by 2020 will lead to a 17% cut in the ETS cap over Phase 3 relative to Phase 2, and that a stricter interpretation of the supplementary criterion is likely given the much greater emphasis on domestic abatement measures beyond 2010. As a result, Deutsche Bank predicts EUA prices at E35/t over 2013-20, and has also raised its Phase-2 EUA forecast to E35/t (previously E25/t).

For further information or to request the research report, please call:

Deutsche Bank

Sarah Yates 
(44 20) 7547 2603
Press and Media Relations

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