Emissions Trading / Carbon Market News (06/03/2023)

Dear Madam or Sir,

In many cities around the world, people took to the streets again last Friday to demonstrate for more ambition in the fight against the climate crisis. In Germany alone, there were reportedly more than 200,000 demonstrators. The slogans on the placards demanded, among other things, “Climate protection instead of coal pollution” and “Speed limit now”. Around the globe, hundreds of demonstrations were announced under the slogan #tomorrowistoolate. At the protest in Berlin, Luisa Neubauer criticised the German government and the coal, oil and gas companies with particularly harsh words. The press quoted her as saying: “They had thought they would be able to get away with green words and green speeches – whether parties, Chancellor or corporations. They thought we wouldn’t notice if things went on under the radar, as if we had three more planets lying around on the highway road construction site.” The activist specifically denounced the behaviour of the German party FDP, which was not only blocking the energy transition and the construction transition in the German government, but now also The activist specifically denounced the behaviour of the German party FDP, which was not only blocking the energy transition and the construction transition in the German government, but now also the EU-wide end of the combustion engine.

The following statement is interesting in this context: “In the political discussion, we see the risk that the EU’s clear decision to phase out the internal combustion engine in 2035 will be questioned again. That carries the risk of a deadlock, and that would be fatal for the car industry.” It is remarkable that this statement comes from Audi boss Markus Duesmann, who in an interview with “Der Spiegel” emphasised the need for planning security for the car industry and its investments worth billions.

The positive role that the ETS has in decarbonising the economy, and in particular the high and further increasing price level of European pollution rights, can be seen among other things in the efforts of the large emitters in the steel and chemical sectors. And the pressure will increase even more after the current reform of the ETS. This was underlined, for example, by the German Chemical Industry Association (VCI). A communication to its members in December was entitled: ” Less free certificates and only under conditions”. The association pointed out that the tightening of benchmarks will further reduce free allocations to production plants covered by the EU ETS. In addition, these plants would be obliged to carry out energy audits. If the audit recommendations are not implemented, 20 percent of the allocated free emission certificates would be cancelled in the future. There will also be mandatory decarbonisation plans for the most emission-intensive plants. If the targets in these plans are not met, 20 per cent of the free allocations will also be cancelled.

The market for European pollution rights started the past trading week slightly below the psychologically important €100 mark. This was obviously the starting signal for speculative market participants to reduce their long positions and take profits. European carbon prices subsequently fell time and again during the week, finally recording a weekly loss of 5.4% and falling to their lowest level in more than two weeks. However, this attracted the expected interest from compliance buyers, which slowed the decline on Friday. The benchmark contract closed slightly below a technical support line, which can be interpreted as an indication that the price could also still fall slightly below the 90-euro mark.

Meanwhile, the question of when and how the frontloading of allowances under the REPowerEU plan will be integrated into the auction calendar has begun to take shape. According to leaked information, it appears that the corrections will first be implemented in the calendar in the summer, together with adjustments within the framework of the market stability reserve – in order to avoid multiple adjustments.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)96.36 EUR91.04 EUR-5.32 EUR 
EUA (December-2023-Future)97.39 EUR92.18 EUR-5.21 EUR 
VCU (Voluntary Carbon Units ø)4.00 USD3.45 USD-0.55 USD 
VER (Gold Standard Spotmarkt ø)2.47 USD2.55 USD+0.08 USD 
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR 
ICE Brent Crude Oil (Benchmark Future)83.29 USD85.98 USD+2.69 USD 
EURO (Currency, Forex)1.0545 USD1.0636 USD+0.0091 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