Emissions Trading / Carbon Market News (19/02/2024)

Dear Madam or Sir,

Last week, the EU decided to support CO2-intensive industry, which is subject to levies in EU emissions trading EU ETS, with a total of four billion euros to reduce 60% of its carbon emissions within three years and 90% within 15 years. 

In addition, the German Federal Ministry of Economics has announced that Germany intends to have the EU emission allowances that are no longer needed due to the coal phase-out cancelled and therefore not transferred to the Market Stability Reserve (MSR). This would possibly have happened indirectly anyway, as the MSR will retire all allowances above its maximum quantity of 400 million EUAs from this year onwards. The exact amount is not yet known.

EU emission allowances have lost almost 30% since the beginning of this year, carbon credits used for the international aviation industry (CORSIA) have gained 29% after months of decline and voluntary carbon credits based on nature projects also appear to have bottomed out with an increase of 65%.

According to various analysts, the prices of voluntary emissions trading certificates will rise by several hundred and even thousand per cent in the coming years, which is why many funds and investors are already beginning to discover this asset class for themselves. However, good advice on which types of certificates could be among the most promising is essential here.

At the end of the week, EU emission allowances were relatively stable compared to previous weeks, falling by only 2.8%. The trading range of the December 2024 EUA futures was not particularly volatile either, with prices ranging between 55.41 and 59.05 Euro.

From a technical point of view, it would now be logical for the EUA to tackle the path above the EUR 60 mark this week, but in the absence of bullish impetus, a further decline could also be possible; after all, the delivery deadline has now been moved from the end of April to the end of September, which makes the usual bullish phase in the first quarter obsolete due to higher demand.

    (Average Quotes Exchange / OTC)       
Instrument09/02/2416/02/24Change
EUA (December-2024-Future)58.79 EUR57.17 EUR-1.62 EUR
VER (Natural Carbon Offsets)1.42 USD1.50 USD+0.08 USD
VER (CORSIA eligible Carbon Offsets)0.78 USD0.76 USD-0.02 USD
nEZ (German National Carbon Units)45.00 EUR45.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)81.67 USD82.75 USD+1.08 USD
EURO (Currency, Forex)1.0782 USD1.0775 USD-0.0007 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.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (12/02/2024)

Dear Sir or Madam

According to a survey conducted by the “Ludwig Erhard Ifo Centre for Social Market Economy” in Fuerth/Germany, 55 per cent of the Germans are in favour of Germany playing a pioneering role in climate protection, while a third are against it.

In order to achieve climate neutrality in Germany by 2045, 28% of respondents are in favour of subsidies, such as the promotion of electromobility. 16% are in favour of climate-friendly standards and bans on climate-damaging measures and just 8% are in favour of higher prices for CO2 emissions, although emissions trading in particular is the cheapest market-based instrument.

For this reason, the climate money needs to be introduced as soon as possible and not in 2026, as German Finance Minister Christian Lindner told newspaper “Welt am Sonntag” at the beginning of February.

The price of European carbon emission allowances only remained above the EUR 60 mark last week after breaking through a sideways-upward support line on Thursday, but this support also failed to hold on Friday. On a weekly closing price basis, EUAs lost a whopping 7.3%.

Technically, there is further support in the EUR 56.90 area, but sentiment is currently so negative that a new price slide is also possible.

The 200-day line is significantly higher at EUR 82.56 and even the 38-day line at EUR 70.23 is a long way from the current oversold price of just under EUR 59 in the December benchmark future.

The demand for the EEX auctions this week could be an indicator of whether price-conscious investors and speculators are now making more purchases again, which would also help the price out of the cellar.

    (Average Quotes Exchange / OTC)       
Instrument02/02/2409/02/24Change
EUA (December-2024-Future)63.40 EUR58.79 EUR-4.61 EUR
VER (Natural Carbon Offsets)1.59 USD1.42 USD-0.17 USD
VER (CORSIA eligible Carbon Offsets)0.88 USD0.78 USD-0.10 USD
nEZ (German National Carbon Units)45.00 EUR45.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)77.40 USD81.67 USD+4.27 USD
EURO (Currency, Forex)1.0788 USD1.0782 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.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (05/02/2024)

Dear Madam or Sir,

Last week, the European Commission initiated infringement proceedings against Germany and 25 other countries for failing to implement a directive on EU emissions trading (EU ETS).

This directive concerned, among other things, the creation of a social climate fund, the new EU emissions trading system for transport and buildings, which is due to start in 2027, and the extension of emissions trading to shipping.

The European Commission has also drawn up a draft climate target for 2040, which, according to the German Press Agency, envisages a 90% reduction in greenhouse gas emissions compared to 1990 and is to be presented this week.

The most important component here is the “Fit for 55” legislative package, which includes extensive measures for industry, the energy sector, the transport sector and agriculture. 

According to the draft, a reduction of 90 – 95% by 2040 is required in line with the recommendations of the Scientific Advisory Board in order to prevent key tipping points in the climate system and “potentially catastrophic impacts on human society and ecosystems” from being exceeded.

As the EU’s central market-based instrument is CO2 emissions trading, the draft is also likely to have an impact on the future design of emissions trading, such as the inclusion of additional sectors and the increase in the annual reduction factor of the emission allowances to be auctioned.

Last week, prices in EU emissions trading fluctuated within a relatively moderate range between EUR 61.23 and EUR 65.16 in the EUA December 2024 benchmark contract.

As the Polish auction will not take place on Wednesday, a total of 11,094,500 EUAs will be auctioned on the other trading days.

    (Average Quotes Exchange / OTC)       
Instrument26/01/2402/02/24Change
EUA (December-2024-Future)63.58 EUR63.40 EUR-0.18 EUR
VER (Natural Carbon Offsets)1.33 USD1.59 USD+0.26 USD
VER (CORSIA eligible Carbon Offsets)0.77 USD0.88 USD+0.11 USD
nEZ (German National Carbon Units)45.00 EUR45.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)83.15 USD77.40 USD-5.75 USD
EURO (Currency, Forex)1.0848 USD1.0788 USD-0.0060 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.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (29/01/2024)

Dear Madam or Sir,

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)       
Instrument19/01/2426/01/24Change
EUA (December-2024-Future)63.65 EUR63.58 EUR-0.07 EUR
VER (Natural Carbon Offsets)1.27 USD1.33 USD+0.06 USD
VER (CORSIA eligible Carbon Offsets)0.66 USD0.77 USD+0.11 USD
nEZ (German National Carbon Units)45.00 EUR45.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)77.88 USD83.15 USD+5.27 USD
EURO (Currency, Forex)1.0898 USD1.0848 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.

With kind regards,

ADVANTAG Services GmbH

Emissions Trading / Carbon Market News (22/01/2024)

Dear Madam or Sir,

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)       
Instrument12/01/2419/01/24Change
EUA (December-2024-Future)65.81 EUR63.65 EUR-2.16 EUR
VER (Natural Carbon Offsets)1.81 USD1.27 USD-0.54 USD
VER (CORSIA eligible Carbon Offsets)0.74 USD0.66 USD-0.08 USD
nEZ (German National Carbon Units)45.00 EUR45.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)78.13 USD77.88 USD-0.25 USD
EURO (Currency, Forex)1.0949 USD1.0898 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.

With kind regards,

ADVANTAG Services GmbH