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**Sandbag estimates ETS emissions will fall by 4.4% in 2014, from 1904mt in 2013 to 1820mt in 2014. **

This fall is split by 81mt from the power sector (falling 7.0% from 1156mt to 1075mt; see Table 1), and 3mt from the industrial sector (falling 0.4% from 748mt to 745mt).

Sandbag estimates supply of 1709mt to market in 2014, leaving a shortage of 111mt of permits (see Table 2). This means the surplus reduces only 5%, still leaving over 2billion allowances in the market at the end of 2014, despite the back-loading decision which takes 393mt of supply away from the market in 2014.

**Dave Jones, Sandbag Analyst**, says: _“With emissions falling structurally well below the level of the cap, the back-loading decision is now providing nothing more than a feeble brake on the growing surpluses within the scheme. If the oversupply of allowances is to be tamed, more substantive requirements are urgently required, including an early, aggressive implementation of the European Commission’s proposed Market Stability Reserve. It is also imperative that back-loaded allowances are not allowed to return to the market.”_

**The large 7.0% fall in power sector emissions is primarily from:**

– A massive 3.8% year-to-date fall in electricity demand across the EU which is in part from weather-related factors (very mild Q1, mild August) and in part from a structural fall in demand due to energy efficiency improvements in all sectors.

– A large increase in renewables capacity, and a windy Q1.

– Summer coal-gas switching in UK – this only happened in UK where there is currently a £9/tonne carbon tax; despite the fall in summer gas prices, the ETS carbon price alone was not enough to encourage switching on the continent.
Sandbag built this up country-by-country from a variety of national TSO and government data sources, ENTSO-E data, and its own estimates.

[Full data tables available here](http://www.sandbag.org.uk/site_media/uploads/2014_forecast_emissions.docx “”)

Note, this follows a 5% fall in power sector emissions from 2012 to 2013, as LCPD coal closed in UK and France, European electricity demand fell 0.9% and substantial new renewables capacity was built.

**The 0.4% fall in industrial emission is primarily forecast from industry association estimates for 2014 production levels: **

– A fast fall in non-CO2 emissions added into the ETS in a 2013 scope change

– Small falls in oil and paper production

– Offset against temporarily higher cement and steel production

_[Further discussion of these projections by Matt Carr at Bloomberg](http://www.bloomberg.com/news/2014-09-19/eu-emissions-drop-seen-accelerating-as-lawmakers-mull-supply-fix.html “”)_