Emissions Trading / Carbon Market News (16/05/2022)

Dear Madam or Sir,

In the past trading week, the price of EUA continued to orientate itself towards the 90-euro mark, whereby this represented a persistent resistance. However, we saw a brief but strong exception to the solid sideways movement on Wednesday, when the market plummeted to just under 82 euros within a few minutes.

The reason for this sharp drop was statements from Brussels that EU lawmakers want to take action against speculative traders participating in the EU Emissions Trading Scheme. In recent months, there have been repeated complaints from MEPs as well as from some member states (which are unfortunately still too dependent on coal-fired power generation). These claimed that unnamed speculators had driven up the price of EUAs too high and that this was costing the industry too much money.

In fact, tomorrow, the Environment Committee will vote on a comprehensive reform of the European Emissions Trading Scheme, whereby shipping, road transport and the heating sector as well as SMEs are to be included in the ETS in the future. As part of this announcement, it was said that financial investors would be excluded from the market from 2025. The actual compromise proposal states that from January 2025, only polluters participating in the system and their financial intermediaries will be allowed to hold accounts in the EU registry. However, an assessment on this is first to be made by the EU Commission by July next year. Due to this clarification, the price quickly got back on track and even briefly broke through the 90-euro mark.

A complete exclusion of speculative traders from carbon trading would indeed be a dramatic break. After all, it was the express will of the Kyoto Protocol that private investors should also participate in carbon trading. In addition, the Market Stability Reserve (MSR) was established to cushion overly strong price fluctuations. A tightening of the MSR as well as a limitation of positions by big investors might be more suitable means to curb the criticised excesses in the sense of the ETS as well as the free market economy. As the European Commission announced late on Thursday, almost 348 million carbon credits will be taken out of the EU ETS by next summer and transferred to the MSR. This does not suggest that legislators are fundamentally interested in a lower CO2 price.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)91.36 EUR88.36 EUR-3.00 EUR
EUA (December-2022-Future)91.54 EUR88.48 EUR-3.06 EUR
VCU (Voluntary Carbon Units ø)10.74 USD10.43 USD-0.31 USD
VER (Gold Standard Spotmarkt ø)5.64 USD4.92 USD-0.72 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)112.81 USD111.50 USD-1.31 USD
EURO (Currency, Forex)1.0534 USD1.0413 USD-0.0121 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.)

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With kind regards,

Advantag Services GmbH