Prices in the EU's emissions trading system have plunged to the lowest levels since a recession-led sell off in March 2009, as European infighting over climate change goals drains the market of demand.
On Friday, prices closed at EUR12.30 per emissions allowance and have fallen to single digits in early trade on Monday, ICIS Heren data shows.
The reason is that the EU is planning to impose new energy efficiency legislation on the same sectors that are included in the emissions trading system. This will lower emissions from these sectors and mean that they will not have to buy as many allowances as previously thought.
Poland has now blocked moves to restrict the supply of emissions allowances and toughen up the EU's existing carbon reduction target.
The news come at the same time as international pressure is mounting on the EU to let some airlines escape the emissions trading system instead of being included next year as planned. This would remove even more expected demand for allowances.
"Overlapping climate policies have robbed the emissions trading system of its ability to provide an investment signal for clean technology. The cost of polluting is too low for companies to spend money on cutting their emissions," Isabel Save, editor at energy information provider ICIS Heren, said.
"If new EU climate goals kill off demand, the supply of EU allowances will have to fall as well for prices to be sustained.
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