EU ETS CO2 emissions down 8.7% in 2019: EC

London — Carbon dioxide emissions under the EU Emissions Trading System fell 8.7% in 2019 from the previous year, including aviation, and by 9% for stationary installations, the European Commission said late Monday.

The figure confirms an S&P Global Platts estimate based on data released April 15 which pointed to a drop of about 8.9% in 2019, excluding aviation.

"The biggest reduction was achieved in the power sector with a decrease of 15% reflecting decarbonisation from coal being replaced by electricity from renewables and gas-fired power production," the EC said in a statement.

The figures represent total demand for carbon allowances among regulated CO2-emitting companies across the 31-nation system in 2019.

The drop in CO2 emissions for all EU ETS installations was slightly smaller because it includes aviation emissions, which bucked the trend, rising by 1% to 68.1 million mt in 2019, the EC said.

CO2 emissions from stationary installations -- mainly power plants and factories -- fell to 1.527 billion mt in 2019, the EC said, down about 155 million mt from 1.682 billion mt in 2018.

The reduction in CO2 emissions in 2019 took place in the context of a growing EU economy, which posted GDP growth of 1.5% in 2019, the EC said.

The almost 9% drop in CO2 emissions was one of the largest annual falls since the carbon market started in 2005.

Low gas prices combine with high carbon prices

A major factor in the reduction in CO2 from power generation in 2019 was a very well supplied and cheap natural gas market in Europe.

Gas is less than half as emissions intensive as coal, per unit of power generated, making the coal-to-gas fuel switch a major source of readily available carbon abatement in Europe, depending on the relative economics of the two fuels.

At the same time, carbon allowance prices were relatively strong in 2019 at around Eur19.00/mt ($20.29/mt) to Eur30.00/mt, compared with Eur8.00/mt to Eur27.00/mt in 2018.

The combination of low gas prices and high carbon prices made gas more competitive against coal, pushing marginal coal plants off the grid and sharply reducing CO2 from electricity generation.

The trend was further compounded by rising availability of renewable energy in 2019 which displaced fossil generation.

Within the industrial sectors, CO2 emissions fell by a more modest 2% in 2019 from 2018 levels, the EC said.

"Emissions reductions have been observed in most industrial sectors, including production of iron and steel, cement, chemicals and refineries," the EC said.

Within the aviation sector, with only intra-EU flights included in the system, 54% of the CO2 emissions were covered by carbon allowances acquired from auctions or other sectors, the EC said.

Aircraft operators received free allocation of 31.3 million allowances, covering 46% of aviation emissions, it said.