Category: Carbon Market News

Dear Madam or Sir,

The Carbon Border Adjustment Mechanism (CBAM), is an important instrument of the European Union for pricing greenhouse gas emissions that occur outside the EU and are subject to little or no pricing there.

From January 1, 2024, imported products made from iron, steel, aluminium, iron ore, hydrogen, electricity, cement, ammonia, potassium nitrate and fertilizers will be recorded and reported.

If there is a price for CO2 or its equivalents in the country of origin, these must also be stated. The carbon border adjustment system is part of the “Fit for 55” package. The aim of the system is to price the emissions associated with the production of imported goods in the same way as they do for production within the EU.

To do this, the person who imports goods must, in the next step, purchase so-called CBAM certificates, whereby one CBAM certificate corresponds to the emissions of one ton of CO2. The price of the CBAM certificates based on the price of the EU emissions allowances (EUA).

CBAM applicants must purchase most CBAM certificates in the year of import, but no later than at the end of the quarter after importing goods, and hold 80% of the certificates. Up to a third of excess certificates purchased can be sold back to the EU member states.

The plan is for a gradual introduction between 2026 and 2034, with a parallel gradual “phasing out” of free certificates.

Deliveries of goods up to EUR 150 are exempt from the reporting requirement. However, a corresponding number of intentional and unintentional violations can be assumed.

The CBAM certificates will be sold to approved applicants at the price of an EU ETS certificate (EUA) via a common central platform set up and managed by the EU Commission. It is currently unclear to what extent intermediaries or other service providers can provide support to the companies affected.

The price of the EU emissions allowances underlying the CBAM has been in a sideways-downward channel since mid-March and last week this was broken downwards, and the EUA even ended the trading week below the channel.

If the EUAs do not manage to sustainably return to this trend channel, it cannot be ruled out that prices could move towards 73 euros. Should the bullish sentiment return, the next resistance would be the 38-day line, which is currently at 82.79 euros, followed by the 200-day line, which is currently at 86.54 euros.

Companies obliged to participate in German national emissions trading system should now make relatively valid calculations for their need for national emissions certificates (nEZ) for the current year, as 2023 certificates will only be available indefinitely for the next five weeks. The last auction with a fixed price of 30 euros will take place on December 7, 2023. After that, only an additional purchase option of 10% is possible; from next year the nEZ will cost 10 euros or 33% more, i.e. 40 euros per nEZ.

(Average Quotes Exchange / OTC)
Instrument	27/10/23	03/11/23	Change
EUA (December-2023-Future)	79.35 EUR	77.64 EUR	-1.71 EUR
VER (Natural Carbon Offsets)	1.41 USD	1.06 USD	-0.35 USD
VER (CORSIA eligible Carbon Offsets)	0.65 USD	0.59 USD	-0.06 USD
nEZ (German National Carbon Units)	30.00 EUR	30.00 EUR	+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)	88.79 USD	85.02 USD	-3.77 USD
EURO (Currency, Forex)	1.0578 USD	1.0729 USD	+0.0151 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

Dear Madam or Sir,

Ukraine is expected to meet all the requirements to join the European Union, and thus the Emissions Trading Scheme (ETS), in the foreseeable future. The Stockholm Environment Institute (SEI) is now launching a project to develop a roadmap for Ukraine’s climate neutrality by 2050, n-tv reported on Sunday. According to the report, Bernardas Padegimas, head of SEI’s environmental policy and strategy team, told the high-level international conference “United for Justice, United for Nature” in Kiev: “We will start actively working on the project and discussing it at different levels. The aim is to help Ukraine achieve climate neutrality through a green transition and recovery”. The development of the project will be funded by the Swedish government. The Minister of Environmental Protection and Natural Resources, Ruslan Strilets, told the same conference that law enforcement agencies are investigating more than 2,500 crimes against the environment as a result of the military aggression of the Russian Federation. The total environmental damage currently amounts to 55 billion euros. According to its Prosecutor General, Ukraine is the first country in human history to investigate crimes committed by occupying forces against the natural environment as war crimes.

For heavy industry in particular, the use of green hydrogen will play a crucial role in reducing CO2 or its equivalent in other greenhouse gases (CO2e) in the future. An important aspect is the decoupling of production and consumption in time and space. Regeneratively produced hydrogen can achieve this and thus represents an important alternative to the gaseous and liquid fossil fuels used to date in the context of the energy transition.

The question of the most environmentally friendly means of transport is also important in this context. Germany’s extensive natural gas network is ideally suited to transporting hydrogen as close to the user as possible, thus making an important contribution to the transition to a climate-neutral economy. The first pipeline is currently being prepared in Lower Saxony. It is the first of its kind in Germany, Open Grid Europe (OGE) announced in Essen. The natural gas from the 46-kilometre-long pipeline section between Lower Saxony and North Rhine-Westphalia will first be pumped into other pipelines. The pipeline will then be upgraded so that it can be used to transport hydrogen, probably from 2025. Converting existing pipelines to hydrogen is undoubtedly a fast and cost-effective way to enter a powerful and efficient nationwide hydrogen network.

The future border tax on CO2 emissions (CBAM) will inevitably affect the behaviour of exporters to the EU. It is therefore not surprising what the news agency Bloomberg reported from China last Thursday. According to the report, China’s Ministry of Environmental Protection has streamlined and centralised the annual reporting process for large companies in seven heavy industries. Previously, emissions reports were managed at the local level. The aim of the new regulations is to help exporters meet the requirements of the CBAM before it comes into full effect in 2026.

European carbon prices fell sharply last week. The correction began on Friday last week and continued until Tuesday. From their high of EUR 86.60 for the 23 December futures contract, EUAs fell by a whopping EUR 5. The market then recovered briefly, but remained volatile until the end of the week. Although there are signs of further price falls, investment funds may start to close a significant part of their short positions before the winter. The resulting rise in prices could in turn attract further buyers and push prices higher.

(Average Quotes Exchange / OTC)
Instrument	13/10/23	20/10/23	Change
EUA (December-2023-Future)	85.95 EUR	81.41 EUR	-4.54 EUR
VER (Natural Carbon Offsets)	1.60 USD	1.59 USD	-0.01 USD
VER (CORSIA eligible Carbon Offsets)	0.75 USD	0.74 USD	-0.01 USD
nEZ (German National Carbon Units)	30.00 EUR	30.00 EUR	+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)	86.00 USD	92.38 USD	+6.38 USD
EURO (Currency, Forex)	1.0514 USD	1.0596 USD	+0.0082 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

Dear Madam or Sir,

On 1 October, the phased introduction of the European Carbon Border Adjustment Mechanism (CBAM) started. The way it works is very simple: companies that want to deliver steel, iron, aluminium, cement, fertiliser as well as electricity and hydrogen to the EU have to pay roughly the same carbon price at the border that European companies already had to pay via emissions trading – at least as far as they cannot prove a comparable climate levy in their own country. In step with the phased introduction of the “climate tax”, European companies will find their previous free allocations of EUAs reduced to zero.

A test phase has been in place since the beginning of this month, in which companies initially only have to report how many tonnes of CO2 the production of imported goods has caused. The first reports are to be submitted at the end of January 2024. Only at the beginning of 2026 will the border adjustment actually have to be paid. By 2030, all goods covered by EU emissions trading are to be included.

Even if the reporting obligation is very detailed and therefore burdensome, CBAM offers companies significantly more planning security. In addition, the levy creates financial pressure for a faster switch to low-carbon technologies, both within and outside the EU. As a positive side effect, the EU can expect billions in additional revenue.

Last week, of course, was dominated by the disgusting attack by Hamas terrorists on unsuspecting people in Israel’s immediate neighbourhood of the Gaza Strip. Since then, the world has been holding its breath at the potential threat of a conflagration. Political measures ranging from the dispatch of aircraft carriers to permanent diplomacy are intended to help prevent worse. In response, the global financial, energy and commodity markets have reacted rather cautiously to this new flashpoint.

The forward contract TTF for delivery in one month, which is the benchmark for the gas price in Europe, already rose to EUR 41.80 per megawatt hour (MWh) on the Amsterdam exchange on Monday and reached its highest level since the end of February on Friday with up to EUR 56.10. However, the war in Israel hardly played a role in this rally. Rather, the price was influenced by other supply risks as well as weather forecasts. The temporary closure of a large natural gas field in the Mediterranean, the damage-related closure of the pipeline between Finland and Estonia and the risk of a strike in the Australian natural gas industry are causing uncertainty in the market. But despite the recent increases, the price of European natural gas is still well below the level it reached after Russia’s invasion of Ukraine. At times last year, more than 300 euros per megawatt hour were due. Russia had sharply curtailed its gas deliveries to Europe, which is why replacements had to be found. At present, however, the European natural gas storage facilities are well filled. Only the oil price showed more pronounced fluctuations, but here, too, there is no talk of panic so far.

The carbon market was pulled strongly upwards from Monday, but the 85 euro mark already proved to be a strong resistance on Tuesday. From Thursday onwards, this line was overcome, but the EUA subsequently failed at the 200-day line. On Friday, a short-term high of EUR 86.60 was recorded in late trading. If there are no further fundamental reasons this week, the EUA should initially continue to move sideways in a narrow range.

(Average Quotes Exchange / OTC)
Instrument	06/10/23	13/10/23	Change
EUA (December-2023-Future)	80.46 EUR	85.95 EUR	+5.49 EUR
VER (Natural Carbon Offsets)	1.74 USD	1.60 USD	-0.14 USD
VER (CORSIA eligible Carbon Offsets)	0.74 USD	0.75 USD	+0.01 USD
nEZ (German National Carbon Units)	30.00 EUR	30.00 EUR	+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)	84.45 USD	86.00 USD	+1.55 USD
EURO (Currency, Forex)	1.0588 USD	1.0514 USD	-0.0074 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

Dear Madam or Sir,

Some people here in Germany will have fond memories of the weather this September, as they were almost entirely spoiled with Mediterranean temperatures. According to the calculations of the German Weather Service (DWD), September 2023 was actually the warmest since measurements began in 1881. After 1959, it was also the second sunniest and, with around 246 hours of sunshine, exceeded the target for a September by 150 hours or almost 65 percent. This not only sounds unnatural, it actually is unnatural. On numerous days, the summer temperature of 25 degrees was clearly exceeded, at its peak even 33.3 degrees were measured. Compared to the reference period from 1961 to 1990, the average temperature was plus 3.9 degrees, which, according to the DWD, is “an unprecedented value in the annals of weather records”. As was to be expected, September was also much too dry. Compared to the reference period 1961 to 1990, only slightly more than half the precipitation fell, at around 32 litres.

What may sound like a comparatively harmless example of climate change, however, must be seen in context. It is absolutely obvious that record months like September and record years pile up on top of each other like stairs and no one can claim in 5 or 10 years that they could not have foreseen the development. And it is precisely this simple foresight, combined with the gigantic costs caused by climate extremes, that must determine our behaviour today.

Anyone who has their own family home and owns or has at least ordered an e-car was able to apply last week for a subsidy programme for self-sufficiency in energy, which was primarily intended to appeal to people in rural areas. It was a combination package of a photovoltaic system, solar power storage and charging station and offered a grant of up to 10,200 euros. There was a total of 300 million euros in the funding pot and by the end of the first day the pot had already been exhausted. On Tuesday, around 190,000 visitors informed themselves about the programme on the website of the state development bank KfW, 66,000 people registered and around 33,000 already had the application approval in their email inbox by the end of the day.

The German government wants to put 15 million e-cars on the road by 2030, seven years from now, but so far only a tenth of that has been achieved. Car manufacturers are ramping up production of e-cars and the government is investing in subsidy programmes, but demand remains lacking. VW sales director Imelda Labbé told the magazine “Automobilwoche” that there is a need to focus more on groups of buyers “who do not have their own home and therefore do not have a secure charging infrastructure”. This seemingly completely logical realisation must spread as quickly as possible.

European carbon prices already fell at the beginning of the last trading week, ending the previous rise at the 86-euro mark. Two consecutive, relatively strong auctions slowed the decline somewhat in the second half of the week, but strong uncertainty remained about the most likely positioning of investment funds in the coming days. The December benchmark contract was most recently oriented towards the 81.50-euro mark and it now remains to be seen whether the price has already found a new support line here or whether it will continue to head south.

(Average Quotes Exchange / OTC)
Instrument	22/09/23	29/09/23	Change
EUA (December-2023-Future)	85.48 EUR	81.67 EUR	-3.81 EUR
VER (Natural Carbon Offsets)	2.29 USD	1.82 USD	-0.47 USD
VER (CORSIA eligible Carbon Offsets)	0.75 USD	0.75 USD	+0.00 USD
nEZ (German National Carbon Units)	30.00 EUR	30.00 EUR	+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)	93.54 USD	92.29 USD	-1.25 USD
EURO (Currency, Forex)	1.0644 USD	1.0589 USD	-0.0055 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

Dear Madam or Sir,

A few weeks ago, we reported on the US billionaire Tom Steyrer, who will continue to expand the real estate portfolio of his investments over the next three years and make them climate-neutral (“Net Zero”) within three years.

His company Galvanize Climate Solutions has now taken the first step by raising one billion US dollars towards “Net Zero”, thereby securing the path for climate-neutral real estate.

Tom Steyrer is clear that properties that cannot be operated in a climate-neutral manner will pose a problem for every portfolio in the coming years.

Accordingly, the IGP Group’s services in Europe are tailor-made to accompany existing properties on their way to Net Zero. With IGP Green Solutions GmbH (www.igp.green), we bundle all of our group’s competencies in addition to CO2 emissions trading and offer property owners the path to climate neutrality and thus to maintaining and increasing value.

To begin with, our engineers will work out a plan on how we can implement renewable energy for the buildings and optimize energy efficiency. We will then show you the path to “Net Zero”, which can then be implemented modularly in stages. Starting from renewable energies to the use of hydrogen in a neighbourhood solution.

For larger operators, financing is often achieved through the elimination of the emissions trading obligation and receipt of funding, which is bundled in the overall concept. But existing owners of residential or commercial properties also benefit from these future solutions.

The prices for CO2 emission rights in the EU emissions trading rose by almost 4% last week and have broken the 85 euro mark again. Technical indicators made the difference here. The 38-day line was an important resistance here and the 80-euro-mark should be a good limit on the downside. The 200-day line is currently at 86.79 euros and could be seen as a barrier, especially since profit-taking could be expected.

This week, a total of 14,601,000 EUAs will be auctioned on the Leipzig EEX on all five trading days. The demand for the auctions will certainly be in the interests of market participants.

(Average Quotes Exchange / OTC)
Instrument	15/09/23	22/09/23	Change
EUA (December-2023-Future)	82.31 EUR	85.48 EUR	+3.17 EUR
VER (Natural Carbon Offsets)	1.77 USD	2.29 USD	+0.52 USD
VER (CORSIA eligible Carbon Offsets)	0.71 USD	0.75 USD	+0.04 USD
nEZ (German National Carbon Units)	30.00 EUR	30.00 EUR	+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)	94.16 USD	93.54 USD	-0.62 USD
EURO (Currency, Forex)	1.0658 USD	1.0644 USD	-0.0014 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