As we all know the emissions price has collapsed. This is well documented and caused because the amount of units in the system, are far more than are actually required. The economics although violent (highly volatile) are working. However, clean dark spreads for Win 06 currently stand at £40.38 in comparison with the clean spark spread at £2.55. Part of the reason for this is that a shortage of gas within the UK system has seen gas prices rise significantly, and so this has seen spark prices fall to very small numbers. Coupled with this we also have coal prices which are at record low numbers. Emissions prices have in the past not helped the dynamic because the differential between spark and dark is so large circa £37, that emissions prices would have to be at €85 to influence the switch. So a fall from €30 to €12 has only increased the amount of money coal fired plant are making, and reduced the amount of money gas fired plant are making.

Note that we have at no point mentioned power prices (which although a function of the spark and dark spread) are reacting to fundamentals. Fundamentally, if the UK creates more nuclear power this will at the moment push gas plants to becoming more marginal and not dramatically reduce emissions, the only way to reduce emissions is see a reduction in gas prices, and an increase in coal prices, something which is less likely to happen in the long run because the worlds resources of coal are far greater than the worlds resources of gas.