By Susanna Twidale
LONDON (Reuters) - Analysts have lowered forecasts for the price of European Union carbon permits for 2020 as a restart to British auctioning of permits, expected following Brexit later this month, will swell supply.
EU Allowances (EUAs) are expected to average 26.57 euros/tonne in Q1 2020 and 32.16 over 2020, according to a survey of eight analysts polled by Reuters, a 4.3% and 6.8% drop respectively compared with forecasts given in October. <COMMODITYPOLL54>
The European Emissions Trading System (ETS) charges power plants and factories for each tonne of carbon dioxide they emit.
Under the scheme every member state has a quota of carbon permits to auction each year but due to uncertainty surrounding Britain's departure from the European Union it has not auctioned any permits since late 2018.
"We expect UK auctions to start at the earliest mid-February, after the EU ratifies the Brexit deal," analysts at Refinitiv said.
Britain has a total of around 110 million allowances to auction for 2019 and 2020 combined, Refinitiv said.
Analysts however had differing views on the timing of sales.
Ben Evans, a market analyst at ClearBlue Markets said the 2019 allowances would likely all be sold in a few months ahead of the April-end compliance deadline.
"This is expected to add downward pressure to market prices over this quarter (Q1)," he said.
Analysts at Refinitiv said the allowances for 2019 and 2020 would likely be distributed evenly over the course of the year.
Average prices were forecast at 36.46 euros/tonne for 2021, down 1% on the previous forecast.
For 2022 the average price forecast increased by 14.3% to 37.71 euros/tonne.
Analysts at Refinitiv said the 2022 forecasts were up compared with the previous forecast due to a reduction in the expected availability of fuel switching from coal to gas power plants across Europe.
"With the assumed more rapid phase-out of coal ... we find that the potential will be more or less exhausted already in 2023," said Refinitiv analyst Ingvild Sorhus.
Many countries, such as Britain and France have committed to end coal-fired power generation this decade while Germany, Europe's biggest emitter of carbon dioxide and buyer of permits under the EU ETS, has announced plans to close coal-fired power plants by 2038.
Coal-fired power stations emit around double the amount of carbon dioxide than gas plants.
(Reporting by Susanna Twidale; editing by David Evans)