EU Handed Out More Free Carbon Allowances Than Needed in 2009

LONDON, April 1, 2010 - The recession made emissions from industrial plants included in the EU's
emissions trading system (ETS) plunge by 11% in 2009.

Overall, the EU handed out more free carbon allowances than were actually
needed for plants to comply with their 2009 emissions. Even though some
plants still faced a shortfall in 2009, this number is smaller than the
surplus held by others in the system.

The result is that most plants could earn money by selling surplus
allowances, given to them for free by the EU. Steel and cement-makers posted
the largest surplus, after their emissions dropped by 20-30%.

UK plants are among the few that received fewer carbon allowances than
they need to comply with their ETS cap. They face a 15m shortfall, which
would cost them around EUR200m at current over-the-counter carbon prices.

If all plants immediately sold off this surplus, the carbon price in the
EU ETS would crash.

"The only thing keeping carbon prices from crashing to zero is the fact
that plants can bank their emissions allowances to use later on, when
emissions should start rising again because of tighter emission caps and an
economic recovery," Isabel Save, editor at energy information provider ICIS
Heren, said.

Plants can bank allowances until at least 2020, when the third trading
period of the EU ETS ends.

"On a country-basis, the flow of money in the ETS will go from plants in
the UK and Germany, which are short overall, to countries like Italy, Hungary
and Poland, which are long overall," Isabel Save said.

ICIS Heren data shows that carbon prices were stable just below EUR13.00
per carbon credit on Thursday, after the EU published the first preliminary
data on 2009 emissions in the ETS.

Many power generators were still slightly short of EUAs in 2009 and
expect to become even shorter over the next years, as emissions start to rise
again. They are buying carbon allowances in the market to cover this.

At the same time, industrial plants are holding on to their carbon
allowance surplus, both to cover their own future emissions caps and to sell
at higher prices once the recession is over.

Note to Editors :

The EU hands out free carbon allowances to all plants included in the ETS
at the start of the year. How many allowances each plant receives is based on
historical emissions.

The EU data released on Thursday is incomplete and will be subject to
changes. A final version will not be released until May.

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    Contact details, for more information and interviews:
    Isabel Save
    Editor European Daily Carbon Markets
    ICIS HEREN
    Tel: +44(0)20-7911-1942
    E-mail: isabel.save@icisheren.com

Contact details, for more information and interviews: Isabel Save, Editor European Daily Carbon Markets, ICIS HEREN, Tel: +44(0)20-7911-1942, E-mail: isabel.save at icisheren.com