Carbon Prices Near Record Lows: Over the last four months, carbon prices have tumbled nearly 70 percent amid fears that oversupply and lagging economic growth in Europe will drive down demand. On October 19, EU allowance contracts closed below 10 euros, and prices for UN carbon credits hit an all-time low of 6.80 euros. Prices have since remained low, and as of November 2, market prices for December 2011 delivery were €9.69 for EU allowances and €6.60 for UN carbon credits.
EU Plans to Expand GHG Limitations to Aviation Face Challenge Before IACO: On October 6, 2011, a European Court of Justice Advocate General concluded that the EU's plans to include all flights originating or landing in the EU in the ETS was legal under international law. The opinion is thought to foreshadow the final ruling of the European Court of Justice in a challenge brought by several U.S. airlines, which is expected early next year. However, it now seems likely that the planned January 1, 2012, inclusion of international flights will be delayed pending resolution of the case.
Most non-EU countries have publicly opposed the aviation ETS. In September, 25 countries including the U.S., Japan, China, India, and Russia, filed a Joint Declaration opposing the aviation ETS and threatening to take the matter before the International Civil Aviation Organization (ICAO). In July, the U.S. passed legislation preventing domestic airlines form participating in the EU ETS, and Russia is currently considering similar measures. Russia has also warned that it may file a formal complaint against the inclusion of aviation in the EU ETS at the next ICAO meeting. In addition recent talks between the EU and China have been unsuccessful, raising the possibility that China will also bring suit challenging the inclusion of its aircraft in the ETS.
Expectations Low for Durban Climate Talks: The final round of U.N. climate negotiations before Durban concluded in Panama on October 7. While important progress was made on a number of measures to assist developing countries and provide for technology transfer, the parties to the Kyoto Protocol remain sharply divided over its future after 2012. There is little optimism that Durban will either result in a new binding global climate agreement or that terms to extend the Kyoto Protocol beyond 2012 will be reached. Instead, it is expected that the parties will turn their attention to framing a plan to create a new global climate regime by 2015.
Australia's Plans for Carbon Tax Move Forward: Australia's lower house has passed a bill that would introduce a carbon tax in 2012 and establish an emissions trading scheme for GHGs by 2015. The Australian Senate has announced its intentions to vote on the bill on November 8. If the bill passes the Senate, 500 of the country's largest emitters will be assessed a carbon tax of A$23 per ton of carbon dioxide emitted beginning July 1, 2012.
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