Australian Carbon Price Forecasts

London, August 2013 Thomson Reuters Point Carbon has announced its initial forecasts for emission volumes and price developments in the Australian cap-and-trade scheme: We forecast Australian Carbon Units will trade at AUD8.8/t (EUR6.2/t) on average between 2015- 2020. This represents an eight percent discount to EUAs. We base our price forecast on the assumption that the cap-and-trade program will survive the next federal election and begin in 2014. We expect covered emissions to reach 337 million tonnes by 2020. We expect emissions from the power sector to decrease 2 percent over the period July 2014- July 2020 due to increased renewables in the fuel mix. We expect industrial emissions to rise because of LNG capacity growth as well as increasing emissions intensity in the mining sector. The cap could be as low as 257 Mt in 2014-2015 or as high as 278 Mt. Setting the cap according to Australia’s UNFCCC emission reduction target of 5 percent below 2000 levels is more lenient than using the default cap in the legislation. We believe there is an equal chance for both caps (UNFCCC and Default cap) to be implemented. Australia will be a price taker in the international carbon markets. We assume Australian emitters will use their full Kyoto credit limit to comply and will use EUAs last. Given the small Australian demand for international credits compared to the larger European and Kyoto markets – which are both oversupplied – we believe Australia will not impact international carbon prices and will thus take the price from the European market. Cecile Langevin, Senior Analyst at Thomson Reuters Point Carbon, commented: “The price of Australian Carbon Units will not be affected whether the Australian Government sets the cap according to Australia’s current UNFCCC emissions target (5% below 2000 emissions levels by 2020) or uses the default cap to increase the target to 15 percent. In either case there will be demand for EUAs, and ACUs will trade at a slight discount. Such a discount is due to the fact that EUAs are internationally traded on a larger market (EU ETS) and thus benefit from greater liquidity. EUAs are also somewhat less risky than ACUs as the EU ETS market has been in existence for longer than the CPM and can be viewed as more politically stable.” Ends — Taylor Scott International