Emissions Trading / Carbon Market News (10/10/2022)

Ladies and Gentlemen

in the first three quarters of this year, emissions from the EU energy sector have risen by about 8% compared to 2021, according to data from a climate analysis research institute. This development unfortunately was to be expected, not least because coal-fired power generation had to be intensified. So Russia’s invasion of Ukraine has paradoxically meant that it is not electricity generation powered by natural gas that can help phase out coal as a bridging technology, but that it is now – at least temporarily – the other way round.

But of course, this does not change the overarching goal of decarbonising the economy, which is to be achieved primarily by switching from fossil fuels to renewable energies. Of course, a short-term plus for coal is a step backwards, as it is simply the most CO2-intensive energy source, but the complete abandonment of fossil energy must be achieved as quickly as possible.

News from the energy company RWE is a positive signal in this respect. RWE wants to bring forward the coal phase-out by eight years to 2030. This is included in the key points of an agreement between RWE, the Federal Ministry of Economics and the Ministry of Economics of North Rhine-Westphalia. The decision would leave about 280 million tonnes of coal in the ground. This would correspond to about 280 million tonnes of CO2 that would no be emitted any more. RWE boss Markus Krebber explained that the phase-out would be socially acceptable and would not be at the expense of the employees. RWE also wants to invest massively in renewable energies in order to make an additional contribution to the phase-out of coal.

This will also be noted with pleasure by the EU parliamentarians who, with the “Fit for 55” programme, are pursuing the goal of reducing net greenhouse gas emissions by at least 55% by the year 2030 and adapting the legislation required for this. This includes, among other things, strengthening and tightening the European Emissions Trading Scheme (ETS) and a new, stand-alone emissions trading system for buildings and road transport. This is supposed to be an essential step towards achieving climate neutrality by 2050, which in turn is the EU’s binding goal under the European Climate Change Act.

Another programme currently under heated discussion, entitled RePowerEU, is now unfortunately aiming in exactly the opposite direction with the question of whether this programme should be partly financed by intervening in the ETS or whether electricity costs can be reduced by a temporary glut of EUAs. Decisions on this have not yet been made, but the discussion alone has already had a significant impact on the carbon market. For example, the President of the European Commission, Ursula von der Leyen, called on Wednesday for an increase in funding for the REPowerEU programme, as otherwise the block would run the risk of fragmenting as member states introduce different levels of support for citizens and companies. Immediately after this news, EUA in December futures plunged from their daily high of 71.36 to below 67 euros.

The carbon market apparently fluctuated during the week between an initially bullish sentiment, which was also influenced by the sharp rise in oil prices, on the one hand, and uncertainty about possible market intervention on the other. The December benchmark contract traded between around €64.50 at the low and €71.36 at the high, repeating almost identically the performance of the previous week.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)66.58 EUR68.55 EUR+1.97 EUR
EUA (December-2022-Future)66.73 EUR68.66 EUR+1.93 EUR
VCU (Voluntary Carbon Units ø)8.18 USD8.61 USD+0.43 USD
VER (Gold Standard Spotmarkt ø)3.96 USD3.76 USD-0.20 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)85.46 USD97.92 USD+12.46 USD
EURO (Currency, Forex)0.9797 USD0.9742 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