June 1 (Bloomberg) -- European greenhouse gas permits rose after President George W. Bush proposed a new round of talks to set targets for cutting emissions.
Permits have more than doubled since February as traders shrugged off concern that the emissions trading regime will fail to adequately tackle climate change. EU regulators scaled back allocations of permits that set a cap on emissions in the five years through 2012, after previously issuing too many.
``The world has come to the conclusion that cap and trade is working,'' said Richard Sandor, creator of U.S. Treasury futures at the Chicago Board of Trade, and chairman of the company that owns Europe's biggest climate exchange. Factories and power stations can sell spare permits for profit if they cut greenhouse gases below their allocations.
Emission permits for delivery next year rose 95 cents, or 4.1 percent, to 23.95 euros ($32) a metric ton, according to prices from the European Climate Exchange in Amsterdam at 11:20 a.m. local time. They've risen from as low as 11.80 euros a ton in February. The ECX, the biggest exchange for EU permits, is owned by Climate Exchange Plc.
Permits also climbed after a government task force recommended Australia introduce a carbon emissions trading system by 2012.
Softens Opposition
In a speech in Washington yesterday, Bush softened his past opposition to setting global goals to cut pollution, calling for new talks to ``establish a new framework'' for 2012, when the Kyoto Protocol, a 1997 agreement to curb global warming, expires. Sandor predicts that the U.S. will start emissions trading, either at a federal or state level, by the end of 2010.
The Kyoto pact between nations has a compliance period that runs for the five years through 2012. Bush walked away from the agreement in 2001, citing costs to the the U.S., the world's biggest emitter.
``My proposal is this: by the end of next year America and other nations will set a long-term global goal for reducing greenhouse gases,'' Bush said, announcing a decision to convene the biggest emitters, including India and China. ``In addition to this long-term global goal, each country would establish midterm national targets.''
Japan welcomed Bush's proposal to cut greenhouse gas emissions, Chief Cabinet Secretary Yasuhisa Shiozaki said today.
G-8 Meeting
The Bush administration has been seeking the removal from a draft Group of Eight declaration of targets for reducing greenhouse gases and language, stressing the need for urgent action to fight climate change. The G-8 meeting takes place June 6-8 in Heiligendamm, Germany.
Items the U.S. wants deleted from the G-8 text include a reference to limiting global warming to 2 degrees Celsius (3.6 degrees Fahrenheit), targets for a reduction of greenhouse gases to half of 1990 levels by 2050, and language that says tackling climate change is an ``imperative not a choice.''
A national trading system for Australia would increase certainty in business investment and promote the development of low-emission technologies, the task group said in a report released today.
Australian Prime Minister John Howard said today his country ``cannot wait for a coordinated global response.''
``The government's response to this report will be measured and balanced but will ensure Australia plays her part in tackling climate change,'' Howard said in a statement.
Power Prices
This year has seen the publication by the United Nations Intergovernmental Panel on Climate Change of the world body's most detailed assessments of climate change. The panel concluded that global warming is more than 90 percent likely caused by human activities such as the burning of fossil fuels, and that temperatures will rise between 1.1 to 6.4 degrees Celsius (2.0 to 11.5 degrees Fahrenheit) by 2100.
The panel has also said global warming will lead to increased droughts, floods and species extinctions, and that the problem can be solved using technology that is currently available or in development.
Higher power prices makes generating more attractive, which can boost demand for EU emission allowances needed when burning coal and natural gas. Germany baseload power for next year rose 40 cents, or 0.7 percent to 56.40 euros a megawatt-hour, according to prices from broker GFI.
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