* 5 firms warn of impact of energy efficiency on CO2 market
* EU utilities fear "tremendous decline" in CO2 price
By Pete Harrison
BRUSSELS, June 14 The Europe Union's carbon
market could be flooded with excess pollution permits over the
next decade, deflating prices and undermining investment in
green energy, five EU energy companies warned on Tuesday.
The utilities, including Britain's Scottish and Southern
Energy (SSE.L) and Denmark's Dong [DONG.UL], said falling carbon
prices could: "severely hamper business incentives to invest in
The EU's upcoming "energy efficiency directive", due in late
June, will propose cutting energy consumption in buildings,
vehicles and more controversially, industry.
Energy efficiency measures for building and transport are
widely supported by many industries, as well as
But carbon market experts say it would be a mistake to put a
further layer of regulation on top of the EU's main tool for
curbing greenhouse gas emissions -- the Emissions Trading Scheme
The ETS covers about 11,000 factories and power plants,
forcing them to buy permits for each tonne of carbon dioxide
they emit, and pushing down their combined emissions with a
steadily decreasing cap.
But an overlying mandate for energy efficiency will reduce
demand for permits -- by about 400 million tonnes in 2013-2020,
EU sources say -- leaving them in the market, and exerting
downward pressure on prices.
One leaked study seen by Reuters foresees carbon prices
falling to 14 euros per tonne, compared with a business-as-usual
price of 25 euros. Another sees the price dropping to zero.
That would please some energy-intensive industries such as
steel, but not those that want to invest in renewable power.
"We are deeply concerned that energy savings resulting from
the implementation of the measures proposed in the Energy
Efficiency Directive will have the unintended consequence of
causing the collapse of or tremendous decline in the carbon
price," the five utilities said in a statement.
They called on the European Commission to draft new laws to
rebalance the ETS in future by withdrawing from the market any
spare permits resulting from energy efficiency measures.
"Failure to do so could severely hamper business incentives
to invest in low-carbon technologies, as the price signal will
be skewed in favour of fossil-based solutions," the statement
The European Commission routinely declines comment of draft
(Reporting by Pete Harrison, editing by Rex Merrifield and