EU carbon market expects boost beyond 2007 data

LONDON (Reuters) - The European Union's executive Commission is set to publish this week 2007 carbon emissions data suggesting a future shortage of emissions permits for heavy industry, under-pinning future carbon prices.

The Commission has said that if it has gathered sufficient data it will publish the data at 1200 Brussels time (1000 GMT) on Tuesday.

The carbon market is supposed to work by putting a price on carbon emissions, forcing businesses to trim their contribution to climate change, for example by being more energy efficient.

"The big picture is that the long-term price signal is higher than up till now," said Deutsche Bank's Mark Lewis.

Two years ago carbon prices collapsed after a surplus of emissions permits emerged in the first year of the first, three-year trading cycle of the carbon market from 2005-07.

The latest emissions data will likely show yet another surplus of permits, called European Union Allowances (EUAs), by more than 100 million metric tons of carbon dioxide (CO2), for participating sectors including metals, power utilities and pulp and paper.

The scheme had no mechanism within its first cycle to adjust the supply of EUAs meaning that the surplus -- attributed by critics to successful lobbying by big business -- persisted until 2007, causing a carbon price collapse.

The Commission had to wait until 2008 to make that adjustment and has done enough to ensure higher carbon prices in future, analysts say.

Including new EU entrants Bulgaria and Romania, the 2008 quota of permits is less than 2.1 billion metric tons of CO2 compared to 2.3 billion metric tons in 2007, said Lewis, who forecasts 2007 emissions of between 2.1 and 2.14 billion metric tons.