EU carbon market emissions fall for sixth year, down 2.7 percent

By Susanna Twidale LONDON (Reuters) - Emissions regulated under Europe's carbon market fell for the sixth straight year in 2016, in part due to lower coal-fired power production, data published on Monday by the European Commission and examined by carbon analysts at Thomson Reuters showed. Around 45 percent of Europe's greenhouse gas emissions are regulated by the Emissions Trading System (ETS), the bloc's flagship policy to cut emissions by charging for the right to emit carbon dioxide (CO2). It is expected to contribute around two thirds of the reductions needed to meet the bloc’s target of slashing emissions by 20 percent from 1990 levels. According to the analysts' interpretation of the data, emissions totalled 1.755 billion tonnes of CO2 equivalent (CO2e) last year for companies under the ETS excluding airlines, down 2.7 percent on the previous year. The analysts earlier on Monday estimated emissions rose by 1.1 percent based on the Commission data. They then refined their estimate due to expectations that one French installation might have submitted incorrect data. The European Commission did not immediately comment on the data. The data showed capped emissions from power and heating generation were down 4.4 percent, while emissions from industrial manufacturers were down 0.5 percent year-on-year. "The drastic decline in power emissions is mainly the result of plunging coal power generation and rising renewables deployment," said Yan Qin, senior modelling analyst at Thomson Reuters. The ETS caps the emissions of around 11,000 power plants, factories and airlines, forcing them to surrender one carbon permit for every tonne of carbon dioxide emitted annually by the end of April of the following year. The emissions figure is keenly watched by participants in the EU's ETS as it provides a first indication of 2016's supply and demand balance. The benchmark EU carbon contract traded at 4.76 euros/tonne at 1330 GMT, up 1.5 euros on Friday's close, but hit a session high of 4.91 euros/tonne immediately after the Commission published the data, and before analysts revealed it likely contained an error. Emissions in the aviation sector rose by 8 percent in 2016 to 61.6 million tonnes of CO2e, the analysts said. Under the ETS airlines have to report emissions for all flights that both take off and land at European airports. (Editing by Jane Merriman, Greg Mahlich)