Emissions Trading / Carbon Market News (23/05/2022)

Dear Madam or Sir,

Last week the Environment Committee (ENVI) of the EU Parliament met as part of the “Fit for 55” climate package. The ENVI had the reform proposals of the European Commission with regard to the EU Emissions Trading (EU ETS) and in some cases tightened them up.

Important key points are now that the affected sectors of the EU ETS reduce their emissions by 67% by the end of the decade. In addition, the European Commission was asked to draw up a proposal that would include all economic sectors in CO2 pricing by 2030. In addition, the linear reduction factor for CO2 emission allowances is to be raised from the current 2.4% to 4.2% per year and increased by an additional 0.1% per year.

Regarding the free allocation of emission rights for energy-intensive industries, it was proposed to reduce them to 90% in 2025, 80% in 2026, 70% in 2027, 50% in 2028, 25% in 2029 and 0% in 2030.

However, the new emissions trading system for the transport and building sectors in particular was controversial and the final compromise proposal is that private vehicle refueling and heating of private residential properties with fossil fuels should only be included from 2029 and prices should be capped at 50 euros.

Furthermore, shipping is to be included in the EU ETS as early as 2024 and waste incineration from 2026.

As seen by the 9% fall in EU emissions allowances over the past trading week, the announcement that the EU is selling more than 200 million Market Stability Reserve (MSR) allowances to raise funds for its Energy Transition Initiative and the to accelerate the move away from Russian energy sources.

Now the whole package will go into the trilogy negotiations in the coming month, where cutbacks will probably have to be accepted at the end of every point. But the bottom line will be a significant strengthening of the ETS and prices could rise above the 100 euro mark. The additional auction of certificates from the MSR is also correct, because the money is urgently needed. In return, the annual reduction factor is likely to increase to 3-4% and the free allocations will be phased out.

  (Average Quotes Exchange / OTC)   
EUA (Spot-Market)88.36 EUR80.24 EUR-8.12 EUR
EUA (December-2022-Future)88.48 EUR80.39 EUR-8.09 EUR
VCU (Voluntary Carbon Units ø)10.43 USD10.53 USD+0.10 USD
VER (Gold Standard Spotmarkt ø)4.92 USD4.73 USD-0.19 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)111.50 USD112.87 USD+1.37 USD
EURO (Currency, Forex)1.0413 USD1.0562 USD+0.0149 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