italy: July 17, 2009

In the last month while energy consumption decreased by six percent in the European sector, Brent oil prices shot up to $70 per barrel. The contrary price run up, which has now returned to lower levels, was blamed on premature expectations that the recession was near its end and increased level of trading speculation.

However, during last month’s oil price increase, it was interesting to note that the European Union Allowances (EUA) did not follow the market trend. In fact, during this period, Emission Units decreased from €15 t/CO₂ to a low of €12.50 t/CO₂. Prices rebounded slightly settling at €13 t/CO₂ at month’s end.

The main reason cited for the decline in allowance pricing was continuing pessimism that the worldwide financial recession has more staying power than previously thought. While analysts point to the fact the recession is harming the US more than the European sector, the downturn still has serious implications for the Continent.

It is estimated that from the beginning of 2009 some 2.821 million tonnes of EUA have been traded with 60 percent of this amount through organized markets and the remaining amount by financial brokers.

Despite the declining trend in EUA trading, Italy has retained its position as the third largest country in terms of emission allowances with 570 million t/CO₂. Italy was fifth in 1990.