Emissions Trading / Carbon Market News (06/07/2020)

Dear Madam or Sir,

Last Friday, Germany’s two legislative bodies decided to gradually phase out coal-fired power generation by 2038. The law is linked to an option for an earlier phase-out, if the framework conditions allow it, as well as to structural aid worth billions for the affected federal states and massive compensation payments for power plant operators for the early decommissioning of their power plants. Is this now the “historic generation project”, as the Federal Minister of Economics calls the decision, or the “historic mistake”, as the CEO of Greenpeace explained?

Whatever one wants to classify the law, it will in any case provide the binding impetus for a series of profound homework to be done by politics, business and society in the coming years. For example, it has yet to be proven that renewable energies can guarantee one hundred percent security of supply in Germany. Otherwise, coal or nuclear power would have to be imported from abroad, which would make the objectives of the phase-out law absurd. It must also be recognised that bridging technologies such as gas-fired power stations with the keyword North stream 2 will play a serious role for some time to come. Increased electricity demand due to electro mobility and electrified motorway routes for heavy traffic must be compensated by lower consumption in other sectors and by new technologies. Seen in this light, the timeframe up to 2038 and 2035 respectively seems quite realistic.

A glance at the development of the CO2 price gives a clear indication of a spectacular trading week. A completely detached, almost diva-like trading process catapulted the market to just over the 28-euro mark. All Corona-related losses were thus more than compensated. At the beginning of March, the average price stood at around 24 euros, then fell by around 10 euros and has now been rising continuously for around four weeks. On Wednesday alone, the price rose by around 1.60 euros. In today’s early trading, this inexplicable trend is continuing unhindered – the 29-euro mark is within sight.

This development is more than astonishing. Even though the compensatory effect of the market stability reserve may be cited as a reason, the price trend is obviously driven purely speculatively. Since 01.07. a corrected auction calendar has been in force, which will provide us with a significantly increased auction volume for the rest of the year. The main reason for the adjustment is the auctioning of an additional 50 million EUA for the European Innovation Fund. In weeks with Polish auctions, the volume will rise to almost 21 million allowances.

(Average Quotes Exchange / OTC)
Instrument 26/06/2020 03/07/2020 Change
EUA (Spotmarket) 24.66 EUR 27.89 EUR +3.23 EUR
EUA (December-2020-Future) 24.73 EUR 27.96 EUR +3.23 EUR
CER (Spotmarket) 0.30 EUR 0.27 EUR -0.03 EUR
ICE Brent Crude Oil (Benchmark Future) 40.69 USD 42.78 USD +2.09 USD
EURO (Currency, Forex) 1.1215 USD 1.1245 USD +0.0030 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. CER CP1 and ERU are eligible in ETS until end of March 2015 and must be swapped into 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.)
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With kind regards,

Advantag Services GmbH