Counting on an Abbott election win
THE carbon tax may have been a hot political topic last year but carbon trading seems to be sliding down the corporate agenda, here and overseas.
European Union carbon permits - representing the world's biggest carbon market - fell 8.9 per cent to €6.67 ($8.34) a tonne last year, marking a fourth decline in five years, and have since dropped as low as €6.22.
Still, the EU contract fared better than the previous year, when the value slumped 49 per cent, according to Bloomberg.
Tumbling carbon prices should be a lure for Australian companies liable to pay for carbon dioxide emissions.
The $23-a-tonne price, implemented last July, is scheduled to convert to a variable price when an emissions trading system starts in 2015. Australian prices will link to Europe's.
Tim Jordan, a research analyst for Deutsche Bank, noted daily European carbon prices were 40 per cent more volatile last year than in 2011.
"Higher day-to-day price volatility suggests that the prolonged debate among European policymakers about the future supply of allowances has left the market without clear guidance," Mr Jordan wrote. "With the Australian carbon price set to track the European price from 2015, a volatile EU carbon price and a lack of consensus about the future supply of allowances is relevant for Australian companies making decisions about low-carbon investments."
Trade-exposed polluters received almost $1 billion in free carbon permits as part of government efforts to soften the impact of the carbon tax.
Rio Tinto got more than $300 million in permits for alumina and aluminium production, while BlueScope Steel collected $135 million, Deutsche Bank said.
The chief executive of CO2 Group, Andrew Grant, an adviser and trader in carbon markets, said Australian companies appeared to be complacent about carbon in general, and many firms were apparently waiting for a Coalition victory in this year's federal election.
The Opposition Leader, Tony Abbott, made a "pledge in blood" in 2011 to repeal the carbon price and related clean energy legislation, if elected, and has campaigned hard against the tax ever since.
Mr Grant said firms appeared to have ditched standard diversification of risk measures that should suggest they at least hedge against the prospect of a price remaining on carbon.
"The traditional strategies don't seem to apply to carbon," Mr Grant said. "I don't know why carbon has become such a strange concept."
Snapping up cheap international carbon credits would seem to make sense even if European prices continued their slide. "The downside is low and the upside is huge," he said.
The value of global carbon market transactions plunged 36 per cent last year, according to Bloomberg New Energy Finance.
The market's value dropped to €61 billion, while total trading volume jumped 26 per cent to 10.7 billion tonnes, equivalent to a third of the world's carbon dioxide emissions. The market's worth would be €80 billion this year, assuming the EU had some success in fixing a glut of permit supply in the bloc and boosting prices, Bloomberg said.