Emissions Trading / Carbon Market News (04/09/2023)

Dear Madam or Sir,

there is news related to global warming that you first must get used to. This includes, for example, an official curfew because it is raining. In summer, in Spain. An indefinite curfew was imposed yesterday for around 10,000 people in the Catalan municipality of Alcanar in the north-east of the country because of the risk of severe flooding. The population was advised to go to the upper floors of their houses if possible. Within only 24 hours, 215 litres of rain per square metre had fallen in Alcanar.

In Germany, the gap in the reduction of climate-damaging greenhouse gases, which the Federal Environment Agency (UBA) put at up to 331 million tonnes of CO2 equivalents in its projection report, could amount to “only” slightly 200 million tonnes in the best case, but only if the German government also consistently implements all the climate precautions adopted and planned by October 2022. These projections refer to Germany’s targets set out in the Climate Act.

However, there is a second gap, to which the Frankfurter Allgemeine drew attention last week. In addition to the national reduction targets, the states of the European Union have, as is well-known, approved to reduce their carbon emissions as a community by 55 percent until 2030. To this end, the EU states agreed, among other things, on the Effort Sharing Regulation (ESR). This regulation primarily covers the main polluters of emissions, namely transport and the building sector. It stipulates that large emitters like Germany must reduce their emissions from 2021 to 2030 by half. If an EU state fails to do so, it must buy emission allowances on the market. If these are not sufficiently available, penalties can be imposed. In relation to Germany, this means – with a projected gap of at least 152 million tonnes of CO2 – compensation payments in the double-digit billions.

To still meet the climate targets, the UBA and other experts called for, among other measures, a significant price increase for national emission certificates for fuels used in transport and buildings (nEZ). In a paper published in July, the UBA proposed raising the price of nEZ to 90 euros as early as next year. In more recent reports, a price of 200 euros per tonne is even assumed from 2025, in another it is 255 euros from 2027.

But whatever measures are taken to narrow the huge emissions reduction gap, they must be recognisably socially cushioned. And the earlier and more consistently this is started, the smaller the financial pressure wave that will come our way – not to mention the impact on our environment.

With the beginning of September, the period with reduced auction volumes ended last Friday. But this circumstance did not trigger any reaction on the European carbon market. In a flat range of about 3 euros, the price moved uninspired along the 86-euro mark. Now that most traders are returning to their desks, it will be interesting to see in which direction the market will break out of the narrowing price corridor.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)84.55 EUR84.43 EUR-0.12 EUR 
EUA (December-2023-Future)85.39 EUR85.27 EUR-0.12 EUR 
VER (Natural Carbon Offsets)1.65 USD1.98 USD+0.33 USD 
VER (CORSIA eligible Carbon Offsets)0.85 USD0.87 USD+0.02 USD 
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR 
ICE Brent Crude Oil (Benchmark Future)84.61 USD88.84 USD+4.23 USD 
EURO (Currency, Forex)1.0798 USD1.0785 USD-0.0013 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