In particular, the protagonists and supporters of a German party that idolises diesel and because of which millions of people are currently taking to the streets in Germany often argue that it would help nothing for climate protection if only Germany and Europe were to reduce greenhouse gases, while the rest of the world would do nothing of the sort.
But this argument is based on faith and not on facts and knowledge and at best serves to dumb people down. The fact is that most of the world’s wind power is generated in China, followed by the USA, Germany and Brazil. Without this, the increase in greenhouse gases in the atmosphere would have been even more significant.
Last Thursday, the Finnish “Centre of Research on Energy and Clean Air”, or “CREA” for short, published a report showing that green investments accounted for 40% of the growth in China’s gigantic economic output last year.
This includes electromobility, wind and solar energy systems, rail transport, hydropower, nuclear energy and energy storage. A total of USD 890 billion was invested in these areas in China, which enabled economic growth of 5.2%; without these investments, growth would have been significantly lower at 3.0%.
What’s more, pricing of greenhouse gas emissions has already been introduced in many countries around the world, following the European model. The emission of one tonne of CO2 currently costs the equivalent of US$ 10.27 in China, US$ 6.72 in South Korea, US$ 70.90 in New Zealand and US$ 28.66 in California, the world’s fourth largest economy.
Prices in EU emissions trading hardly moved at all last week on a weekly closing price basis, but they broke free from the steep sideways-downward trend channel over the course of the week and moved in a trading range between EUR 60.86 and EUR 66.43 in the benchmark December 2024 contract.
In this trading week, a total of 13,404,500 EUAs will be offered for auction on all five trading days on the European Energy Exchange.
(Average Quotes Exchange / OTC)
Instrument
19/01/24
26/01/24
Change
EUA (December-2024-Future)
63.65 EUR
63.58 EUR
-0.07 EUR
VER (Natural Carbon Offsets)
1.27 USD
1.33 USD
+0.06 USD
VER (CORSIA eligible Carbon Offsets)
0.66 USD
0.77 USD
+0.11 USD
nEZ (German National Carbon Units)
45.00 EUR
45.00 EUR
+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)
77.88 USD
83.15 USD
+5.27 USD
EURO (Currency, Forex)
1.0898 USD
1.0848 USD
-0.0050 USD
(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. EUA, 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.
After weeks of wrangling, the German Federal Parliament’s Budget Committee approved the budget for 2024 on Thursday evening, thereby complying with the debt brake for the first time since 2019. Total expenditure is planned at around 476.8 billion euros. The parliament is expected to finally approve the budget on 2 February. As is well-known, the federal budget should have been in the bag long ago, but a landmark judgement by the Federal Constitutional Court thwarted the governing coalition’s plans last November. As a result, billions had to be plugged in the budget and in the climate and transformation fund. In some cases, painful cuts and savings as well as a reduction in subsidies were unavoidable. In addition, the reduction in the national carbon price from 45 to 40 euros was cancelled.
The biggest challenge for the coalition parliamentary groups was to draw up a balanced budget that prioritised social justice, economic incentives, investment in climate protection as well as strengthening democracy and international cohesion, despite very different perspectives, against the backdrop of multiple crises and despite a difficult starting situation following the Federal Constitutional Court ruling.
It is in the nature of things that this cannot be achieved to everyone’s satisfaction. Even if German farmers seem to be the most vocal in their protest against the gradual dismantling of the agricultural diesel privilege, one omission should be emphasised much more clearly: the continued failure to implement the ‘climate money’ that had been agreed in the coalition treaty. On Wednesday, Federal Economics Minister Robert Habeck called the idea behind the ‘climate money’ “captivating”: the state returns a significant proportion of the revenue from the national and European CO2 levy to all citizens of the country in the form of direct payments. If everyone receives the same amount, the expected price increases for electricity and heat will be compensated to some extent, especially for those who consume less. Although they are less affected by energy price increases in absolute terms, rising petrol prices and more expensive heating are all the more of a burden in relation to their income. On the other hand, those who consume a lot in terms of consumption, travelling, heating and private electricity will be disproportionately less relieved by the ‘climate money’. This creates an incentive to save energy. At the same time, the wealthy finance the ‘climate money’ of others and the energy transition for all.
This makes it all the more tragic that the establishment of a payment mechanism, which requires 82 million potential holders of a tax identification number to be linked to an account number, has not yet been prioritised. However, movement has apparently taken place in the past week to help climate protection gain more acceptance among voters in time for the next general election. In Berlin, government spokesperson Steffen Hebestreit referred to statements made by Finance Minister Christian Lindner, according to which the technical requirements for a per capita payment would probably be in place by the end of the year. “Then you have to decide in the budget where this money should come from”.
Meanwhile, the carbon market analysts can forget about looking at the weather forecasts. When cold weather fronts appear on the horizon, the price of EUA shows virtually no sign of them. One of the reasons for this is the EU Commission’s fatal decision to auction off 20 billion euros worth of pollution allowances prematurely to finance the RePowerEU programme – so-called “frontloading”. However, the intention behind this measure was obviously not only to generate additional revenue in the ETS, but also to correct prices, which would reduce energy costs for the industry. Overloaded with EUAs, however, the market is as sluggish as a container ship lying deep in the water.
We already warned here in December 2022 that it is not the task of emissions trading to relieve industry of energy costs. Rather, the ETS functions as a cap-and-trade system, i.e. it is based on reducing the quantity of certificates. And one of the aims of the “Fit for 55” programme is to further sharpen this system in order to still achieve the CO2 reduction targets and thus the 1.5 degree target. A flood of EUAs would counteract this and also make a mockery of the market stability reserve. In any case, it is absurd to abandon the targets of the ETS, even temporarily, in order to finance the same targets as part of the RePowerEU programme. On the contrary, cheap EUAs also make coal and gas cheaper and would slow down efforts to phase out these energy sources. Therefore, if the ETS is to contribute to financing the RePowerEU programme, then only in line with the common objectives, i.e. through higher prices and thus higher revenues in the ETS.
After a slightly bullish start, emission allowances came under even greater pressure from the second half of the past trading week. The Dec 24 contract fell further and closed at EUR 63.65, the same level as in September 2022. This could prompt hedge funds to liquidate short positions in order to drive the price upwards, although this is not yet a foregone conclusion. Should the current price level fall further instead, a correction by the EU Commission would be highly desirable in both senses of the word.
(Average Quotes Exchange / OTC)
Instrument
12/01/24
19/01/24
Change
EUA (December-2024-Future)
65.81 EUR
63.65 EUR
-2.16 EUR
VER (Natural Carbon Offsets)
1.81 USD
1.27 USD
-0.54 USD
VER (CORSIA eligible Carbon Offsets)
0.74 USD
0.66 USD
-0.08 USD
nEZ (German National Carbon Units)
45.00 EUR
45.00 EUR
+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)
78.13 USD
77.88 USD
-0.25 USD
EURO (Currency, Forex)
1.0949 USD
1.0898 USD
-0.0051 USD
(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. EUA, 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.
Following several earthquakes, a volcano has erupted in Iceland for the second time in two weeks, emitting large quantities of dust, ash and lava as well as CO2.
Over the past millions of years, volcanoes have ensured that there is sufficient CO2 in the atmosphere to prevent the heat from the sun’s rays in the atmosphere from being quickly reflected back into space, thus creating temperatures conducive to life.
Deniers of human-made climate change like to point this out while ignoring the fact that humans currently emit 100 times more greenhouse gases into the atmosphere each year than all volcanic eruptions combined. As a result, the balance is significantly disturbed and the so-called greenhouse gas effect leads to an increase in the global average temperature with the known consequences, such as extreme weather events, which occur much more frequently the higher the global temperature rises.
These extreme weather events occur because the atmosphere absorbs more moisture, which leads to exceptional regional precipitation and the jet stream responsible for the respective weather conditions slows down in its movement. This in turn leads to weather patterns remaining stable for longer, resulting in either months of rainy weather, as was the case this winter, or months of drought, as was the case in 2018/2019.
These correlations should be recognized by agriculture, then the further subsidization of fossil fuels, which cause this climate change and thus cause more frequent crop failures, would not be high on the list of priorities.
Last Thursday, the auction calendar for national emissions trading in Germany was published by the Leipzig-based EEX. The first auction will take place much later this year than last year, when the auctions started on 10/01/2023.
As before, the nEHS auctions will take place on Tuesdays and Thursdays.
The following dates are of special interest:
05/03/2024 First auction in national emissions trading 2024 (nEZ23/nEZ24)
19/09/2024 Last auction for 2023 nEZ
05/12/2024 Last auction for 2024 nEZ in 2024
The first auction for EU emission allowances (EUAs) takes place today and it will be interesting to see what demand will look like after EUAs lost almost 14% in the last week alone and even briefly fell below the EUR 65 mark. This price level was last seen 15 months ago. However, if the current price level holds, a technical counter-reaction back above the EUR 70 mark would be likely; if not, then the EUR 60 mark would merely be a psychological resistance level.
(Average Quotes Exchange / OTC)
Instrument
05/01/24
12/01/24
Change
EUA (December-2024-Future)
76.35 EUR
65.81 EUR
-10.54 EUR
VER (Natural Carbon Offsets)
1.18 USD
1.81 USD
+0.63 USD
VER (CORSIA eligible Carbon Offsets)
0.54 USD
0.74 USD
+0.20 USD
nEZ (German National Carbon Units)
45.00 EUR
45.00 EUR
+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)
78.75 USD
78.13 USD
-0.62 USD
EURO (Currency, Forex)
1.0943 USD
1.0949 USD
+0.0006 USD
(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. EUA, 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.
In 2023, the German government generated a record amount of more than 18 billion euros from carbon emissions trading, which was five billion or 40% more than in the previous year.
A total of almost 8 billion euros was generated from the auctions in the European Emissions Trading system EU ETS and almost 11 billion euros in the national Emissions Trading System nEHS. This revenue is likely to continue to rise as the prices for national emissions certificates are now 50% more expensive than in 2023.
The fact that emissions trading has a strong steering effect is shown by the decline in the use of lignite in Germany, which in 2023 will have reached the level of 60 years ago, as published by the think tank Agora Energiewende This was mainly due to the expansion of renewable energies, which increased by 12% last year.
Compared to the previous year, carbon emissions therefore fell by 73 million tonnes to 673 million tonnes in 2023, the largest decrease ever. At 138 terawatt hours, wind energy was ahead of lignite for the first time last year, with 132 TWh.
However, there are also areas that clearly missed their targets, such as the transport sector once again. Here, a reduction of only 3 million to 145 million tonnes of CO2 was recorded, i.e. 12 million tonnes too much than planned. This also applies to the building sector, which also showed a decrease of 3 million tonnes to 109 million tonnes of CO2, which is 8 million tonnes above the target.
Nevertheless, the installation of more than 1,000,000 solar systems last year and an increase of 14 gigawatts of energy generation also set a record. Commercial and private installations each accounted for half of this figure.
As Germany is the largest industrialised nation in the EU, these figures have put the price of CO2 emission allowances in the EU ETS under considerable pressure in the past trading week, which is why prices have fallen below the €80 mark again, down 5%.
However, the further we move towards the end of the submission deadline, a bullish development is likely, which is why it could be wise to use this weak phase to buy parts of your EUA portfolio.
This week, there are still no auctions on the EEX; they will only start again for EUAs in the following week. Prices could also be driven up by the fact that a prolonged cold front has arrived in Europe, which will increase demand for energy accordingly.
(Average Quotes Exchange / OTC)
Instrument
29/12/23
05/01/24
Change
EUA (December-2024-Future)
80.37 EUR
76.35 EUR
-4.02 EUR
VER (Natural Carbon Offsets)
0.91 USD
1.18 USD
+0.27 USD
VER (CORSIA eligible Carbon Offsets)
0.59 USD
0.54 USD
-0.05 USD
nEZ (German National Carbon Units)
30.00 EUR
45.00 EUR
+15.00 EUR
ICE Brent Crude Oil (Benchmark Future)
76.83 USD
78.75 USD
+1.92 USD
EURO (Currency, Forex)
1.1036 USD
1.0943 USD
-0.0093 USD
(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. EUA, 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.
In the last short trading week between the Christmas holidays and New Year, there was not too much news that had a fundamental impact on the price of EU emission allowances.
In contrast to the rest of the energy sector, however, European Allowances (EUA) rose slightly by just under two per cent at the end of the week and closed above the EUR 80 mark for the first time since the end of November.
As of today, the new price for national emission allowances in Germany applies, which has risen by a whopping 50 per cent from EUR 30.00 (nEZ23) to EUR 45.00 (nEZ24). For end consumers, of course, plus VAT.
This is still a long way to the prices of EU emission rights, but it will be noticeable for consumers, just like the end of the reduced VAT for the catering industry, which since yesterday is 19% again instead of the corona-related 7%.
Now that the construction industry has entered a crisis due to the rise in interest rates and inflation as well as the high cost of construction services and materials, restaurants are facing a tough challenge as well. Here too, in addition to the search for staff, the question now arises as to whether there will be sufficient demand if these costs are passed on.
The current survey of German liberal FDP members has shown that they are in favour of a continuation of the current government constellation by a narrow majority. An early election is unlikely to be expected from this side.
However, the German state elections in Saxony, Thuringia and Brandenburg, which will take place in September, already allow us to predict that the current governing parties will no longer play a significant role there and that the state parliaments there will move noticeably to the right – towards a party that denies anthropogenic climate change. The decision of the FDP members was therefore a very sensible one, as this could also be expected at federal level.
(Average Quotes Exchange / OTC)
Instrument
22/12/23
29/12/23
Change
EUA (December-2023-Future)
78.90 EUR
80.37 EUR
+1.47 EUR
VER (Natural Carbon Offsets)
1.04 USD
0.91 USD
-0.13 USD
VER (CORSIA eligible Carbon Offsets)
0.74 USD
0.59 USD
-0.15 USD
nEZ (German National Carbon Units)
30.00 EUR
30.00 EUR
+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)
78.94 USD
76.83 USD
-2.11 USD
EURO (Currency, Forex)
1.1007 USD
1.1036 USD
+0.0029 USD
(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. EUA, 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.