The EU ETS Market – 15.09.2020

EU-ETS Policy Update: a busy policy autumn ahead

EUA will again take direction from policy in the coming weeks and months, and we expect more volatility on Brussels-related news and announcements.

The autumn kicked off with signals the European Commission could be proposing a 2030 climate ambition target in the higher end of the 50-55% reduction announced in Green Deal. Last Friday, 11.09, the European Parliament’s environment committee has voted for a new EU-wide target to reduce carbon emissions 60% by 2030, setting the stage for tough negotiations with EU countries and the European Commission, which is expected to propose a 55% goal this week.

With regards to other policy-related drivers; while the UK’s exit from the EU-ETS is settled, the impact of a potential no-deal Brexit on the economy could spill over to EUA.

The ICE ECX exchange from London closed yesterday at 30,47 euro EUA futures with more than 7% more than Friday, 11.09.

Source: EC, Brussels and ICE ECX, London

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Romanian industry under pressure amid delayed indirect EU ETS cost payments

Published by Carbon Pulse, London on August 26, 2020

Many of Romania’s heavy industries risk insolvency as the government has not yet compensated facilities for their indirect ETS costs, despite getting EU state aid approval to do so in May.

Aluminium producer ALRO declared on 23.08 that its Slatina facility faced insolvency and would run out of funding to pay staff within months unless the government paid compensation for costs associated with increased electricity prices as a result of the bloc’s carbon market. Just three weeks earlier, ALRO had declared a first-half net profit of RON 254 million (€52 mln), with calculations assuming indirect cost compensation, a measure set out in the ETS Directive to prevent carbon leakage.
The company, likely attempting to pressure the government to speed up the payments, said it could eventually be forced to declare bankruptcy and leave around 20,000 people unemployed.

The European Commission in May approved a €291 mln state aid scheme for Romania’s heavy industry. According to a Commission document, the programme is financed through the country’s share of revenues from auctioning EUAs in 2019.
Romania’s Ministry of Economy, Energy, and Business Environment had not responded to requests for comment at the time of writing.

The ALRO facility is not the only industry in Romania that has faced insolvency issues as a result of higher carbon prices – a situation that is “worsening every year” for the country’s energy- intensive industries, according to Romania-based carbon consultant Casiana Fometescu.

Many of these facilities belong to local authorities and are often granted loans or borrow from municipalities to cover ETS-related costs before the carbon market’s annual compliance deadline at the end of April.
Romania’s chemical and fertiliser industries have been among the country’s most affected, with many of them declared insolvent or filing for bankruptcy over the past decade.

“Romanian industries have made a lot of investments in modern technologies to reduce their carbon intensity, but they can’t do too much to reduce emissions as long as they are still coal dependent,” Casiana Fometescu told Carbon Pulse.

At the end of 2019, 12 EU countries – Finland, Belgium, France, Germany, Greece, Lithuania, Netherlands, Poland, Slovakia, Spain, UK, and Luxembourg – provided some form of compensation to their industries for indirect ETS costs.
Czechia aims to start doing so (https://carbon-pulse.com/100649/) next year while Finland intends to stop. coal powered.

Romania generates around a quarter of its total electricity from coal, with power costs rising significantly as a result of higher EUA prices – at €29 on Wednesday – and taking a toll on the country’s state-owned energy companies.
The European Commission approved in February a €251 mln emergency loan (https://carbon-pulse.com/92983/) to utility CE Oltenia, Romania’s second biggest utility, to help the struggling firm meet its EU ETS obligations.
The state aid was approved under the condition that CE Oltenia was able to fully repay the loan six months later, or present a restructuring plan for the company. The utility this week submitted a 2021-26 restructuring and decarbonisation plan setting an objective to cut CO2 emissions by around 38%, with total investments amounting to €1.5 billion.
The strategy, CE Oltenia said in a statement (https://www.ceoltenia.ro/comunicat-118/?parent_page=142) , would partly draw funding from the EU ETS’s €14 bln Modernisation Fund, which supports mainly Central and Eastern European countries.

Romanian energy companies joined a call on June 8 (https://carbon-pulse.com/101000/) – together with utilities from Poland, Bulgaria, Croatia, Cyprus, Czechia, Estonia, and Hungary – asking for more compensation amid the EU’s plans to tighten its 2030 climate target to 50-55% below 1990 levels, up from the current 40%.
The companies argued that the increased 2030 target could push EUA prices to as high as €75, which would deliver proportionally higher costs to the bloc’s more fossil fuel-reliant economies.

They called for more financial support and a higher share of the bloc’s allowances to be auctioned during Phase 4 (2021-30) to be earmarked to help the EU’s poorer member states decarbonise.

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The European Carbon Market, 19.08.2020

EUA rebound from last week

EUAs recovered from a dip below €25 on Friday 14.08, but remained down so far this month as wider economic worries and weaker power markets outweighed the effect of halved auction supply.

EUAs jumped 3% higher on Monday 17.08 and 1% on Tuesday 18.08 closing € 26,55, after strong support near €25 appeared to encourage bullish bets that drove prices high enough to trigger short-covering.

EU puts €13.8 mln into new ArcelorMittal steel carbon capture effort

The EU has awarded €13.8 million to a project aimed at deploying two advanced carbon capture technologies at steelmaker ArcelorMittal’s Belgium facilities and burying emissions in the North Sea.

German firms risk ‘double burden’ from EU ETS and national scheme

More than 900 EU ETS-covered installations in Germany face a liquidity squeeze following the launch of the national emissions trading system (nEHS) next year as the two schemes will impose a ‘double burden’ that may not be compensated until a year and a half later, an analysis has found.

Spain confirms closure of additional 1.2 GW of coal capacity through 2022

The Spanish government on Thursday approved the closure of three more coal-fired power plants through 2022, slashing further the country’s coal capacity that has been in steady decline over recent months.

EU and Switzerland to link emissions trading platforms from September

A planned link-up of the EU and Swiss carbon markets will be operational from September, the European Commission said, giving companies a broader pool of potential partners with which to trade emissions permits

Source: Carbon Pulse, London and Euractiv, Brussels

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The European CO2 Market – 07.07.2020

EU Market: EUAs surge to 2020 high near €30 on speculative buying, short-covering

EUAs surged to €29,39 on Tuesday evening, 7th July, at ICE ECX exchange from London to hit their highest so far this year, rebounding by almost 50% from early March as speculators buying drove a strong auction result and widespread short-covering.

Several EU environment ministers voice support for higher 2030 emissions goal

A number of EU environment ministers on Tuesday, 23rd June, backed a 2030 EU-wide emissions reduction target of 55% below 1990 levels, with some nations even wanting to raise the bloc’s ambition still further.

The incoming German presidency of the Council of EU member states will keep climate policy and the bloc’s carbon market high on the agenda, as Berlin will be responsible for fostering agreements among EU nations over an upgraded level of ambition for 2030.

German Chancellor Angela Merkel endorsed the proposal by the European Commission to raise the bloc’s greenhouse gas reduction target for 2030 to between 50 and 55%. Moreover, the French President Emmanuel Macron will put forward in September new climate legislation based on citizen proposals and push for more climate ambition at EU level.

Global energy emissions growth sees dip in 2019 as coal’s role fades – BP source

Global CO2 emissions from energy use grew by 0.5% in 2019, only partially unwinding the unusually strong 2.1% rise in 2018, oil major BP said in its annual energy review published on Wednesday, 17th June 2020.

Source: Carbon Pulse, Thomson Reuters, London

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The CO2 Market – 01.06.2020

Change of outstanding rights from CERs to EUAs certificates

We have noticed in these months that some of Romanian operators have not used the opportunity to exchange the outstanding rights they have in their emissions Registry account and swap them from CERs into EUA certificates.

In accordance with the EU Regulation no. 1123/2013 of the Commission on determining the right to international credits under Directive 2003/87 / EC of the European Parliament and of the Council, installations in Romania older than 2012 are entitled to 11% of the total allocation 2008 – 2012 to convert from CER certificates into certificates EUA or 4.5% for new entrants and aviation. These rights are automatically calculated by the Registry software and displayed in your Registry account.

We remind you that the right of swap expires on April 30, 2021, the date of compliance with the phase III EU ETS, and the possession of CER certificates and their exchange into EUAs are no longer allowed in the phase IV (2021-2030).

Therefore, we recommend you to check your  Registry account, and if you still have outstanding rights, to perform the SWAP operation that does not involve any financial effort on your part, but especially could generate substantial amounts of “cash” for the company in this difficult period.

The price of the EUA certificate on the ICE ECX London stock exchange closed yesterday, 01.06.2020, at 20.97 euro / tCO2.

For additional information regarding the trading procedure on the conversion of CERs into EUAs, please contact us at: info@carbonexpert.ro or 0744760710.

Source: Carbon Expert & Bloomberg

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The CO2 Market 12.05.2020

Seal of approval for Romania state aid

The European Commission on Monday, 11.05.2020, approved a state aid request from Romania to partially compensate its energy-intensive industries from higher electricity costs as a result of the EU ETS. The scheme will cover the period 2019-20, with a provisional budget of approximately €291 mln (RON 1397 mln). This makes Romania the 13th EU nation to compensate for indirect costs, which currently does not have a harmonised system and is subject to the 27-nation bloc’s state aid guidelines.

EU ETS non-compliance rises in 2019

More than 300 installations and airlines failed to meet their obligations under the EU ETS in 2019, according to data published by the European Commission on Monday, 04.05.2020, with the non-compliance rate jumping by nearly 50% since last year.

EU to withdraw another 332.5 mln carbon allowances from ETS after supply glut drops 16%

The EU will be withdrawing 332.5 million EUAs from circulation in the 12 months from 1 September 2020, the European Commission announced last week on Friday, 08.05.2020, on the total number of allowances in circulation (TNAC). The units will be placed in the Market Stability Reserve. This number is down from the 397 million being withdrawn at present, but again represents 24% of TNAC.

EU Market: EUAs ease, stick around €19 amid lack of driving forces

European carbon prices eased on Monday, 11.05.2020, as competing bullish and bearish forces and a general lack of strong drivers continued to keep prices stuck around €19.

EUA Dec-20 increased by €0.38 last week and closed at €19.35 (+2.00%). Traded volumes decreased compared to the previous week with 93.7Mt versus 107.9Mt exchanging hands on ICE ECX across contracts.

Screenshot 2020-05-12 at 06.42.54

Source: Carbon Pulse and Clear Blue Markets, London

 

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The CO2 Market 07.04.2020

CO2 Emissions fell in the EU ETS by 8,7% in 2019

Greenhouse gas emissions regulated under Europe’s carbon market fell by 8.7% last year, preliminary like-for-like European Commission data examined by carbon analysts at Refinitiv showed.

Around 45% of the European Union’s output of greenhouse gases is regulated by the Emissions Trading System (ETS), the bloc’s flagship policy to tackle global warming by charging for the right to emit carbon dioxide (CO2).

The Refinitiv carbon analysts’ interpretation of the data found stationary emissions covered by the scheme such as power plants and factories, totalled 1.536 billion tonnes of CO2 equivalent (CO2e), down 8.7% on the previous year.

The fall was largely due to a drop in emissions from power generation as coal-fired output was replaced by gas-fired generation and renewable power such as wind and solar.

An UN study published on November 2019 showed that if the global CO2 pollution fell with 7,6% year by year, the Paris agreement goals could be achieved. Yet, the estimations of the international CO2 emissions reductions caused by Corona crisis are only of 5% compared to 1.5% after 2009 crisis.

CO2 Price increase in Europe

EUAs raced up by over €2.50 to top €20 on Monday, 06.04, as shorts scrambled to cover positions and as wider European markets rallied on signs of a slowdown in coronavirus cases, even as oil prices declined.

EUA Dec-20 increased by €1.57 last week and closed at €17.96 (+9.58%). Traded volumes decreased compared to the previous week with 115.5Mt versus 167.6Mt exchanging hands on ICE across contracts. The total Open Interest decreased by 106.2Mt for a total of 783.6Mt due to the expiry of the March contract.

Source: Reuters Point Carbon and ClearBlueMarkets, London

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The Carbon Market 31.03.2020

Prices increased

The EUA Dec-20 price closed at €17.06 on Monday, 30.03.2020 (+4.09% than Friday, 27.03.2020).

EUA Dec-20 increased by €0.28 last week and closed at €16.39 (+1.74%). Traded volumes decreased significantly compared to the previous week with 167.6Mt versus 278.2Mt exchanging hands on ICE across contracts. The total Open Interest increased by 16.1Mt 22.00 for a total of 889.8Mt.

No delay of the surrender deadline

Although the EU Commission announced on Thursday, 26.03.2020 that there will not be any postponement of the CO2 compliance deadline of the EU ETS installations, which remains on 30 April 2020, our forecast is bearish on this week due to weak market fundamentals and the spread of COVID-19.

Screenshot 2020-03-30 at 20.19.21

Source: The European Commission, Brussels & ClearBlueMarkets, London

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The CO2 Market 24.03.2020

Last week, EUA prices witnessed a historic weekly crash of 27% and closed at a year and a half low of €15.54 on Monday, 23.03.2020.

Since the week prior, quarantine measures, travel restrictions, and business closures have significantly increased across the EU and will likely remain over the coming weeks at least. This has spurred fear of significant emission reductions to come in the EU market, causing the selling pressure to aggressively increase far beyond what the market buyers could handle.

Screenshot 2020-03-23 at 19.48.29

EU states, UK hand out a further 8.5 mln free EUAs for 2020

EU member states and the UK handed out a further 8.5 million free carbon allowances to industrial emitters over the past two weeks, according to updated data released late Friday, 20.03, by the European Commission.

Germany indicates leniency in EU ETS compliance deadlines due to COVID-19 crisis

Germany will take into account instances where EU ETS compliance deadlines have not been met as a result of the coronavirus outbreak and could grant clemency in some cases, the government announced on Friday, 20.03.

Poland to push for emergency EU ETS changes if virus impact persists

Poland may propose emergency EU reforms including ETS changes, the country’s climate ministry told Polish state media on Thursday, 19.03, aiming to reduce the burden on its economy as it comes under intense strain due to the Coronavirus.

Source: Carbon Pulse and ClearNewMarkets, London

 

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The CO2 Market 09.03.2020

News Update

Lombardy in quarantine  because of Corona virus and the state of New York asked for emergency. All commodities markets collapsed this morning at opening.

The carbon market collapsed to 22,37 Euro/EUA early in Monday morning, but went a little bit upper to 22,65 at mid-day. Last week prices also had a volatility between 23.24 – 24.04 Euro/EUA.

Markets Comment

All major markets in Asia moved higher on Thursday. In another milestone for China’s recovery, the yuan on Wednesday rose to 6.91 against the US dollar. While the spread of the virus continues to accelerate outside China, domestic outbreaks appear to have slowed significantly since mid-February. The resumption of work has returned as well as the movement of workers to some major cities and carbon consumption now returning to more than 70% of last year’s levels. The main assumption is that the virus in China will stop at the end of the first half. The huge volatility of markets and commodities has even led the Carlyle Group to delay Atotech’s IPO.

This is not the first time, however, that we have observed disruptions and events that are hindering global growth, but this is not necessarily bad, as there are arising significant opportunities.

Technical Analysis

We see the reaction after the announcement of interest rate cut in the US by 0,50% that showed how much it is affected by the liquidity flowing into the system and in conjunction with the compliance period. Area 23-23.3 is particularly important and only a significant deterioration in global growth  could possibly lead to break it. Technically most formations pointing lower, but that still has to be proven. Until then it remains trapped between 23-25.89 range and the 23-23.3 area looks attractive for buying.

Source: AitherCO2, London

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