Emissions Trading / Carbon Market News (20/03/2023)

Dear Madam or Sir,

Last week, the German Federal Environment Agency (UBA) published the preliminary greenhouse gas emission data for the past year. As a result, German emissions fell by 1.9% last year. According to the UBA, a total of 746 million tons of CO2 or its equivalent (CO2e) were emitted. Since 1990, annual emissions in Germany have already fallen by 40.4%.

Due to the increased energy production from coal caused by the Ukraine war, 10.7 million tons more were emitted in this area than in 2021, but the sector target of 257 million tons was just met thanks to the increase in renewable energies and the relatively mild winter.

Unfortunately, the sectors that have been subject to pricing as a result of German national emissions trading since 2021 remain above the target values. The transport and building sectors are again above the annual emission levels specified in the German Federal Climate Protection Act.

In the transport sector, around 1.1 million tonnes more CO2 were emitted than in the previous year, despite record figures for the registration of e-cars. With 148 million tons of CO2, this area is well above the permitted 138.8 million. In the buildings sector, around six million tons or 5.3% less were emitted in 2022, but with 112 million tons of CO2, the buildings were still above the legal limit of 107.4 million.

The share of renewables in gross electricity consumption rose from 41.2% to 46.2%. In the heat sector, the proportion also rose from 15.8% to 17.4% and the total reduction in greenhouse gas emissions in Germany last year through the use of renewable energies amounted to a remarkable 232 million tons of CO2.

In the past week, the market for European carbon emission allowances followed the financial markets and fell across the board. EUAs in the December 2023 benchmark futures contract were just above the €86 mark at last Friday’s low but recovered slightly to close the last week of trading at €87.29, a loss of 12.5% on a weekly closing basis.

The EUAs followed the bank stocks. In the same period, the EURO STOXX Banks Index lost 11.4% amid fears of a new financial crisis after several US banks had to be supported and the Swiss Credit Suisse was saved from bankruptcy with 50 billion. In the meantime, the major Swiss bank UBS has signalled an interest in taking over the ailing Credit Suisse.

Institutional investors such as banks and financial institutions in particular got out of emission rights last week and the spread between the auction results on Friday and the current stock exchange trading was exceptionally high at minus 2.4%.

In this market environment, it is difficult to predict whether it is just a financial crisis “light” or there will be a déjà vu from 2008.

Should things calm down, the EUA could quickly move back above the 90 Euro mark. As long as the financial markets remain nervous, the next technical support would be around the 83 euro area.

The Leipzig energy exchange EEX will auction a total of 9,168,000 EUAs next week and 775,500 emission allowances for aviation (EUAA) on Wednesday. The demand for the auctions in the coming week will remain an important price-influencing factor on the market.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)98.22 EUR86.03 EUR-12.19 EUR 
EUA (December-2023-Future)99.80 EUR87.29 EUR-12.51 EUR 
VER (Natural Carbon Offsets ø)3.52 USD3.48 USD-0.04 USD 
VER (CORISA eligible Carbon Offsets  ø)2.29 USD2.28 USD-0.01 USD 
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR 
ICE Brent Crude Oil (Benchmark Future)82.66 USD72.51 USD-10.15 USD 
EURO (Currency, Forex)1.0640 USD1.0667 USD+0.0027 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