Emissions Trading / Carbon Market News (26/09/2022)

Ladies and Gentlemen

Last Friday, the Fridays for Future (FFF) movement had called for the 11th global climate strike since its founding in 2018. According to media reports, hundreds of thousands of people followed the call in many countries – in Germany alone, a total of around 280,000 mostly young people took part in the protest for climate protection and climate justice. In Berlin, FFF activist Luisa Neubauer said: “Those who think there is no way out are left with nothing but despair. Those who know that there is another way can get going and act. We have the knowledge, so let’s get going.”

In addition to the well-known appeals to achieve the 1.5-degree target, FFF called for the German government to establish a special fund for climate and security. As part of the budget negotiations, 100 billion euros should be made available to accelerate the radical phase-out of all fossil energies. The current energy crisis reveals how vulnerable society is in terms of energy supply. The climate and energy crises are mutually dependent.

One can only agree with this. At the latest with the start of the unbelievably stupid war against Ukraine, it became clear to everyone how dangerous the dependence on fossil energies is. It became even clearer that hesitation in phasing out fossil fuels would be wrong in every way. Therefore, the demands of some European politicians to intervene in the Emissions Trading Scheme (ETS) in order to make fossil energy cheaper seem all the more incomprehensible.

And it is not only FFF supporters who warn against rash decisions. According to the Börsenzeitung, banks, energy traders, energy exchanges as well as utilities are also mobilising with EU lawmakers against possible restrictions on the ETS. In a joint letter from eight European associations to the responsible leaders of the EU Commission and Parliament as well as the Czech Council Presidency, they warn that the current efficient functioning of the ETS could be significantly impaired, which could then also threaten Europe’s decarbonisation efforts. In the letter, the associations reiterated that a diverse ecosystem of participants ensures that the carbon market is resilient, easy and cost-effective to access. It would also be better equipped to offer hedging and risk management solutions to companies. To achieve its decarbonisation goals, the EU needs a liquid and resilient market.

The background for this appeal is the current final negotiations for a reform of emissions trading, which is part of the major climate package “Fit for 55”. One of the proposals of the EU Parliament is to restrict participation in trading with CO2 certificates to compliance agencies and certain financial intermediaries. This should help to prevent market speculation and thus be a step against high energy prices. The EU Commission and the vast majority of EU member states reasonably reject such a restriction. However, the associations concerned fear that these ideas could still become part of a compromise. The Czech EU Presidency is keen to finalise an agreement on the reform of the ETS in the fourth quarter.

The prices for EUA had again approached the 100 euro mark a little over a month ago, before the aforementioned statements deeply worried market participants. In the past trading week, the price had initially held in a sideways movement just above 70 euros for lack of direction, but on Friday EUAs then fell by up to 7.2% to a new six-month low as traders reacted to the news that Germany is also considering a larger revenue target through the sale of EUAs under the so-called “RePowerEU” plan. According to this, it is not only about making fossil energy cheaper through a lower carbon price, but also about special revenues from the sale of additional emission allowances from the Market Stability Reserve (MSR).

There are certainly other effective instruments for this. Moreover, such a plan not only contradicts the purpose of the ETS and the MSR, but it is also short-sighted, because the price collapse so far, which was based solely on uncertainty, has already meant that the EU has collected around 250 million euros less each week at the auctions than would have been possible with a solid auction result. So, what is supposed to be additional revenue in the short term would turn out to be a financial loss in the long term.

  (Average Quotes Exchange / OTC)   
Instrument16/09/2223/09/22Change
EUA (Spot-Market)73.08 EUR65.61 EUR-7.47 EUR
EUA (December-2022-Future)73.27 EUR65.77 EUR-7.50 EUR
VCU (Voluntary Carbon Units ø)9.42 USD9.40 USD-0.02 USD
VER (Gold Standard Spotmarkt ø)4.18 USD4.03 USD-0.15 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)91.46 USD86.75 USD-4.71 USD
EURO (Currency, Forex)1.0014 USD0.9690 USD-0.0324 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask has usually in Spot Market a visible spread. The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. Crude Oil and Euro Currency shows day-end-exchange quotes. This market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (19/09/2022)

Ladies and Gentlemen

In November, the UN world climate summit COP27 will take place in Sharm El-Sheikh, Egypt. In the run-up to this event, more than 530 of the world’s largest institutional investors have joined forces and urge the governments of all countries to take much faster and more effective action against the global climate crisis.

Since these mostly Asian, American and European institutional investors manage assets totalling a good 40 trillion US dollars, their influence should not be underestimated.

In particular, five measures to be implemented in the short term are required to limit climate change to a maximum increase of 1.5°C in accordance with the Paris Climate Protection Agreement.

Governments should ensure that greenhouse gases other than CO2, such as methane, are reduced by at least 30% compared to 2020, in accordance with the “Global Methane Pledge”. In addition, both state and private investments are to be steered significantly more towards climate-friendly investments and disclosure requirements regarding the effects on the climate for investments are to be resolved. Here, climate protection investments in developing countries are to be given increased attention.

The investors jointly demand to be aware of the urgency of the moment and to achieve the decarbonization of the global economy by 2050, with the phasing out of fossil fuels being the priority.

But it is not the sudden morale of capital that drives these investors, but the fear that the consequences of climate change will melt away the considerable fortunes and also the prosperity of rich regions, like the glaciers in the Alps.

What’s particularly ironic about the story is that a large part of these same fortunes have been made from fossil fuels. Still, $40 trillion is a powerful argument to help turn things around.

After the bears had the upper hand on the market for European Emission Allowances for three weeks, the bulls had fodder again last Monday after EU climate chief Frans Timmermann clearly rejected ideas for a price cap for emission allowances. On Friday, the EUAs rose again after a strong auction and marked the weekly high at just under 74 euros, before the pollution rights said goodbye to the weekend with an increase of nearly 11%.

A total of 10,323,000 EUAs will be auctioned at EEX Leipzig this week, with 929,000 EUAs coming from a rare Northern Irish primary market auction this Wednesday.

In addition, the last auctions for 2021 National Emission Certificates (nEZ) will take place next Tuesday and Thursday, so that the delivery can still be made in time to the accounts of the companies subject to the compliance duty. The submission deadline for 2021 ends on Friday, September 30th, 2022 in Germany’s National Emissions Trading System; the last day to purchase 2021 or 2022 nEZ for the purpose of the tax obligation is 22/09/2022.

  (Average Quotes Exchange / OTC)   
Instrument09/09/2216/09/22Change
EUA (Spot-Market)65.90 EUR73.08 EUR+7.18 EUR
EUA (December-2022-Future)66.08 EUR73.27 EUR+7.19 EUR
VCU (Voluntary Carbon Units ø)8.96 USD9.42 USD+0.46 USD
VER (Gold Standard Spotmarkt ø)4.10 USD4.18 USD+0.08 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)92.10 USD91.46 USD-0.64 USD
EURO (Currency, Forex)1.0041 USD1.0014 USD-0.0027 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask has usually in Spot Market a visible spread. The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. Crude Oil and Euro Currency shows day-end-exchange quotes. This market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (12/09/2022)

Dear Madam or Sir,

The carbon market was unable to hold the 70-euro mark in the past trading week, although it looked like it would in the middle of the week. But instead the EUA fell to a half-year low on Friday and recorded a loss of more than 15% on a weekly basis. The main reason for this was a profound uncertainty in the market triggered by statements by Eastern European politicians. For example, the Czech Minister of Industry and Trade, Jozef Sikela, spoke out in favour of opening a discussion on intervention in emissions trading. The Polish Prime Minister Morawiecki even suggested in an interview to suspend the entire emissions trading for one or two years.

EU energy ministers met in Brussels on Friday to approve a series of emergency measures to curb the effects of rising energy prices. The EU Commission is to present a concrete legislative proposal on this in the coming days. Among other things, it is to explore the temporary possibilities of skimming off excess profits of power producers as well as a cap on the price of gas.

However, a plan to sell emission certificates from the market stability reserve worth 20 billion euros was also discussed. Minister Sikela stressed that in an extraordinary situation, extraordinary measures are necessary without deviating from the common climate goals in the long term. But this formulation could prove to be a Pandora’s box. For what does the long term mean in this context? An international group of climate scientists has published a current analysis of the world climate in the journal “Science”. This involved the so-called “tipping points”, i.e. a critical threshold at which momentum is created so that further development becomes unstoppable. This means, for example, that after a certain point a glacier melt can no longer be stopped, no matter what is done. The researchers concluded that when global warming reaches an average of 1.5 degrees Celsius compared to the pre-industrial age, four such tipping points will be reached at once, namely with the Greenland and West Antarctic ice sheets, the dying of tropical coral reefs and the thawing of the permafrost. Based on developments in recent years, they predict that these 1.5 degrees will already be reached in 2030. That is, in less than eight years.

Can it therefore be responsible to even begin to think about measures that would set us back in terms of climate protection in order to cope with the current crises? After all, it was already clear immediately after Russia’s invasion of Ukraine that this war and the reactions to it would cost us all a lot of money and bring with it hardship. So, it is imperative to get out of panic mode as soon as possible and not to start again by hastily sacrificing urgent measures to curb global warming. If it is both right and possible to spend billions upon billions to prevent out-of-time despots from forcibly imposing their great power fantasies, then a similar effort must also be possible to achieve the global transformation towards a climate-neutral economy and a society that has truly understood that together we have only this one planet at our disposal.

  (Average Quotes Exchange / OTC)   
Instrument02/09/2209/09/22Change
EUA (Spot-Market)77.70 EUR65.90 EUR-11.80 EUR
EUA (December-2022-Future)77.89 EUR66.08 EUR-11.81 EUR
VCU (Voluntary Carbon Units ø)8.44 USD8.96 USD+0.52 USD
VER (Gold Standard Spotmarkt ø)3.85 USD4.10 USD+0.25 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)93.02 USD92.10 USD-0.92 USD
EURO (Currency, Forex)0.9956 USD1.0041 USD+0.0085 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask has usually in Spot Market a visible spread. The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. Crude Oil and Euro Currency shows day-end-exchange quotes. This market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (05/09/2022)

Dear Madam or Sir,

The US Department of Climate and Oceanography has reported that 2021 CO2 concentrations averaged 414.7 parts per million (ppm), which is the highest level in a million years and should be known to policymakers.

Even if the federal government reports that the German gas storage facilities are now well filled, the price for gas also influences the price of electricity, which has lost all traction on the electricity exchanges in Europe in recent weeks with prices of more than 1,000 euros per MWh for 2023 contracts.

However, at the end of the last trading week, the prices for gas and electricity on the European Energy Exchange fell significantly. Natural gas cost just EUR 225.11 per MWh on the spot market last Friday, and electricity also fell back to EUR 422.25 / MWh (German Power Future Baseload). The coming weeks will show how sustainable this relaxation is.

The relief package totalling 65 billion euros, which the German Chancellor Olaf Scholz presented last Sunday, is intended to help low earners and pensioners in particular with regard to inflation driven by energy prices.

In addition to various direct supports, Germany’s national emissions trading system should also be used here, in that the increase from 30 to 35 euros per tonne of CO2 will not take place on January 1st, 2023 and will be postponed by one year. From the point of view of climate protection, this is a completely wrong signal – a much better solution could have been created here.

The prices for EU emission allowances continued to collapse in the bearish environment last week, dipping well below the 80 euro mark. Since the end of last week, after the halving of the auction volume in August, a much higher number of certificates can be found in the EEX auctions.

This week, however, due to a working meeting of EEX, there are auctions of a total of 11,702,500 EUA only on Monday, Tuesday and Friday, but in the coming week the volume will increase to 20.5 million emission allowances, which of course is likely to be a downward pricing trend power. It will be interesting to see how the market absorbs this extremely high volume over the coming months.

This may be a good time for compliance buyers to start stocking up on certificates for this year now.

  (Average Quotes Exchange / OTC)   
Instrument26/08/2202/09/22Change
EUA (Spot-Market)90.03 EUR77.70 EUR-12.33 EUR
EUA (December-2022-Future)90.31 EUR77.89 EUR-12.42 EUR
VCU (Voluntary Carbon Units ø)9.56 USD8.44 USD-1.12 USD
VER (Gold Standard Spotmarkt ø)4.21 USD3.85 USD-0.36 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)100.82 USD93.02 USD-7.80 USD
EURO (Currency, Forex)0.9965 USD0.9956 USD-0.0009 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask has usually in Spot Market a visible spread. The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. Crude Oil and Euro Currency shows day-end-exchange quotes. This market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (29/08/2022)

Dear Madam or Sir,

one thing is certain – the year 2022 has the potential to show those with political responsibility what the consequences of unchecked climate change will be.

In addition to the drought in large parts of Europe, China is also affected by an extreme drought, which is associated with the longest heat wave since weather records. As a result, China’s largest freshwater lake, the Poyang, is in danger of drying up and many rivers are drying up as well. The power supply from hydropower has fallen by more than half and the industry is now suffering from energy shortages in the wake of Covid, with electricity already being rationed in some provinces. The consequences for the global economy in times of Corona and the Ukraine war are already noticeable.

The decline in greenhouse-gas emissions in the EU over the last three decades, which is around a third or 1.55 billion tons of greenhouse-gases, shows that European climate policy is bearing fruit.

Since three quarters of all man-made carbon emissions result from the burning of fossil fuels, the use of renewable energies in industry and buildings and the use of alternative drives in the transport and traffic sector is of crucial importance for global greenhouse gas reduction.

In a few years it will become clear whether the current trouble spots, such as the Ukraine war and the drought catastrophes in large parts of the world, are accelerating the shift towards global decarbonisation, or whether the burning of coal is to be stopped for temporary reasons of convenience and political intransigence as the most climate-damaging energy source, is not immediately reduced as soon as the energy crisis makes this possible.

Exchange-traded electricity prices on the spot and futures markets are currently climbing to alarming levels in Central Europe. The prices have meanwhile broken through the mark of 700 euros / MWh on the spot market and have therefore increased within a few months. On the derivatives market, the price of 1,000 euros / MWh for the EEX Phelix DE peak load Cal-2023 has already fallen.

Emission rights, which carried out the scenario of a correction below the 90-euro mark that we assessed as possible in the last market report, have decoupled from this in the past trading week. Should the price hold the support in the area of approx. EUR 88, a course above the EUR 90 mark would be the most likely possibility in the new week.

  (Average Quotes Exchange / OTC)   
Instrument19/08/2226/08/22Veränderung
EUA (Spot-Market)97:82 EUR90:03 EUR-7:79 EUR
EUA (December-2022-Future)98:01 EUR90:31 EUR-7:70 EUR
VCU (Voluntary Carbon Units ø)8:36 USD9:56 USD+1:20 USD
VER (Gold Standard Spotmarkt ø)4:09 USD4:21 USD+0:12 USD
nEZ (German National Carbon Units)30:00 EUR30:00 EUR+0:00 EUR
ICE Brent Crude Oil (Benchmark Future)95:71 USD100:82 USD+5:11 USD
EURO (Currency, Forex)1:0202 USD0:9965 USD-0:0237 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask has usually in Spot Market a visible spread. The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. Crude Oil and Euro Currency shows day-end-exchange quotes. This market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH