The Associated Press: EU business lobby opposes pollution fees plan

BRUSSELS, Belgium (AP) — The EU business lobby urged the European Union Thursday to drop anti-pollution plans that could increase costs for companies, saying the current financial crisis is already badly hurting their competitiveness.

The EU plans would force industries to buy all pollution permits — which are now free — in the future.

Recession smudges carbon outlook - Investors Chronicle

The prospect of a full blown global recession could threaten the health of the carbon trading markets, according to carbon market analysts IdeaCarbon, as the slowdown in economic activity across Europe threatens to slash the projected shortfall between European Union carbon allowances and European industry emissions.

This could reduce demand for carbon allowances by around 44 per cent over the 2008-12 period, according to IdeaCarbon, and is already reflected in the recent fall in the price of EU allowances from a peak of €29.33 in July to €17.40 in late October. IdeaCarbon's director of strategy and intelligence, Andrea Vitelli, said: "Our latest forecasts suggest EU industrial output will grow at just 1 per cent in 2008, and shrink by 0.7 per cent in 2009. This will reduce the level of emissions from industry across Europe, and therefore cause a drop in the shortfall of credits." On top of industrial output decline, lower gas prices are leading to a switch from coal to gas-fired power generation, which produces less emissions.

The knock-on effect could threaten the economic viability of projects in the developing world which create carbon credits to be sold into the European system. Aim companies Camco, EcoSecurities and Trading Emissions could all find their development plans affected by the falling carbon price.

KBC's director of research Andrew Shepherd-Barron said: "Lower prices for carbon are not a great thing. The emphasis at the moment is on delivery of existing projects but this will take out marginal projects."