Green Markets

EWN Publishing

Emissions futures would start trading even before the permits were issued in 2012; at $50 a tonne or more, power plants would shut

Posted by gmarkets on 26 September, 2007

Government will need to establish a set of rules and targets for companies, said Catherine Ford, business development manager of energy futures marketing and consulting company d-cyphaTrade. It was possible that emissions futures would start trading even before the permits were issued in 2012, as long as the rules were clear, she said. This would allow companies planning investments to lock in some of their returns sooner. Emissions futures will trade along with electricity futures, and eventually gas and coal futures, allowing the industry to plan ahead. But a lot depends on the price the government sets on emissions, according to Stephen Wisenthal writing in The Australian Financial Review, (5/6/2007, p.21).

• If $10 a tonne, effect would probably be limited to conservation measures at existing power stations;

• at $15 or $20, gas-fired power becomes more competitive with coal, while at $30, carbon capture and sequestration and renewables come into play;

• at $50 a tonne or more, power plants would be shut down.

Gas player the big winners: The winners are likely to be domestic gas producers, such as Santos, Australian Worldwide Exploration, Tap Oil and Woodside Petroleum, Goldman Sach JB Were said in a report. Electricity retailers such as Origin Energy and AGL Energy are likely to maintain their margins by passing on the cost of the carbon credits and higher electricity prices, the broker said. However, it is too hard to assess the likely effect on generating companies until the government releases more details on the caps and the rules for issuing extra permits to some power stations, GSJBW said.

The Australian Financial Review, 5/6/2007, p. 21

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