Emissions Trading / Carbon Market News (05/06/2023)

Dear Madam or Sir,

On Thursday, a majority of MEPs voted in favour of strengthening a set of rules that will oblige EU-based companies to consider human rights and environmental standards within their value chains.

The provisions in the future EU Supply Chain Act stipulate that European companies as well as third-country companies operating in the EU with 250 or more employees and more than €40 million in global turnover must prevent, end or mitigate the negative impacts of their operations on human rights and the environment, such as child labour, slavery, pollution or biodiversity loss. They must also assess the human rights and environmental impacts of their value chain partners, including supply, transport, distribution and sales.

This would then also force these companies to fully disclose their carbon footprint as well as take measures to reduce it as part of corporate sustainability requirements. Companies not obeying the rules would be held liable and could be fined at least 5% of their global turnover. Now that the Parliament has adopted this position, negotiations with Member States on the final form of the Directive can begin. In the so-called trilogue, the EU Commission, Council and Parliament must agree on a common regulation. Germany will then probably have to sharpen its Supply Chain Act (LkSG), which is in force from January 2023.

This is certainly another important step on the way to a lower-carbon economy. So far, Europe has not acted fast enough. This is the conclusion analysts from Bloomberg take place in a current update. They summed up that although energy-related emissions in Europe are already declining, the pace of emissions reduction must be doubled. Europe would need to mobilise over $32 trillion in investment to achieve a net-zero energy economy by 2050. Efforts should focus on a step-by-step introduction of clean energy, not only in industrial production, but in particular in road transport and building heating, as well as an increasing use of net-zero fuels in key sectors.

In addition to effective legislation, the importance of emissions trading and high carbon prices repeatedly comes into focus in order to quickly take place towards the goal of a net-zero economy.

In the past trading week, however, EUAs initially continued their downward trend, even reaching a new four-month low – before recovering on Friday morning after the auction on the EEX was again executed at a premium to the spot market.

For the whole month of May, EUA lost 7.2 per cent. As data from the London exchange ICE show, financial funds had bet more heavily than ever on falling prices in the weak macroeconomic environment, thus – in addition to low gas prices and mild temperatures – causing significant damage to the market. Nevertheless, an even more extreme crash didn’t take place. The low of the benchmark contract at EUR 78.45 was still clearly above the bottom that was to be expected from a chart perspective at around EUR 77.45. At every price point in the downward trend, there were plenty of buy bids, which shows that parallel to the large short positions, there was also a pronounced interest in taking advantage of the low prices to buy – which also remains a clear recommendation for the coming days.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)81.05 EUR77.75 EUR-3.30 EUR 
EUA (December-2023-Future)82.30 EUR78.99 EUR-3.31 EUR 
VER (Natural Carbon Offsets)1.28 USD1.11 USD-0.17 USD 
VER (CORSIA eligible Carbon Offsets)0.93 USD0.77 USD-0.16 USD 
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR 
ICE Brent Crude Oil (Benchmark Future)77.05 USD77.78 USD+0.73 USD 
EURO (Currency, Forex)1.0727 USD1.0728 USD+0.0001 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