Emissions Trading / Carbon Market News (23/10/2023)

Dear Madam or Sir,

Ukraine is expected to meet all the requirements to join the European Union, and thus the Emissions Trading Scheme (ETS), in the foreseeable future. The Stockholm Environment Institute (SEI) is now launching a project to develop a roadmap for Ukraine’s climate neutrality by 2050, n-tv reported on Sunday. According to the report, Bernardas Padegimas, head of SEI’s environmental policy and strategy team, told the high-level international conference “United for Justice, United for Nature” in Kiev: “We will start actively working on the project and discussing it at different levels. The aim is to help Ukraine achieve climate neutrality through a green transition and recovery”. The development of the project will be funded by the Swedish government. The Minister of Environmental Protection and Natural Resources, Ruslan Strilets, told the same conference that law enforcement agencies are investigating more than 2,500 crimes against the environment as a result of the military aggression of the Russian Federation. The total environmental damage currently amounts to 55 billion euros. According to its Prosecutor General, Ukraine is the first country in human history to investigate crimes committed by occupying forces against the natural environment as war crimes.

For heavy industry in particular, the use of green hydrogen will play a crucial role in reducing CO2 or its equivalent in other greenhouse gases (CO2e) in the future. An important aspect is the decoupling of production and consumption in time and space. Regeneratively produced hydrogen can achieve this and thus represents an important alternative to the gaseous and liquid fossil fuels used to date in the context of the energy transition.

The question of the most environmentally friendly means of transport is also important in this context. Germany’s extensive natural gas network is ideally suited to transporting hydrogen as close to the user as possible, thus making an important contribution to the transition to a climate-neutral economy. The first pipeline is currently being prepared in Lower Saxony. It is the first of its kind in Germany, Open Grid Europe (OGE) announced in Essen. The natural gas from the 46-kilometre-long pipeline section between Lower Saxony and North Rhine-Westphalia will first be pumped into other pipelines. The pipeline will then be upgraded so that it can be used to transport hydrogen, probably from 2025. Converting existing pipelines to hydrogen is undoubtedly a fast and cost-effective way to enter a powerful and efficient nationwide hydrogen network.

The future border tax on CO2 emissions (CBAM) will inevitably affect the behaviour of exporters to the EU. It is therefore not surprising what the news agency Bloomberg reported from China last Thursday. According to the report, China’s Ministry of Environmental Protection has streamlined and centralised the annual reporting process for large companies in seven heavy industries. Previously, emissions reports were managed at the local level. The aim of the new regulations is to help exporters meet the requirements of the CBAM before it comes into full effect in 2026.

European carbon prices fell sharply last week. The correction began on Friday last week and continued until Tuesday. From their high of EUR 86.60 for the 23 December futures contract, EUAs fell by a whopping EUR 5. The market then recovered briefly, but remained volatile until the end of the week. Although there are signs of further price falls, investment funds may start to close a significant part of their short positions before the winter. The resulting rise in prices could in turn attract further buyers and push prices higher.

  (Average Quotes Exchange / OTC)   
EUA (December-2023-Future)85.95 EUR81.41 EUR-4.54 EUR
VER (Natural Carbon Offsets)1.60 USD1.59 USD-0.01 USD
VER (CORSIA eligible Carbon Offsets)0.75 USD0.74 USD-0.01 USD
nEZ (German National Carbon Units)30.00 EUR30.00 EUR+0.00 EUR
ICE Brent Crude Oil (Benchmark Future)86.00 USD92.38 USD+6.38 USD
EURO (Currency, Forex)1.0514 USD1.0596 USD+0.0082 USD

(The VER quotes are average rates (carboncredits.com), which can be used within the framework of CORSIA and voluntary carbon offsetting. 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.)

Please call our international carbon desk if any further questions exist: +49.2831.1348220.

With kind regards,

ADVANTAG Services GmbH