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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The CO2 Market 25.02.2020

The EUA price varied in the period 17-24.02.2019 varied between 24,04 – 25,79 Euro/tCO2.

The UK published the auction calendar on Friday, 21.02.202, and the output is that 123,4M units will be released in forms of auctions or free allocation from the United Kingdom from 04.02 – 15.12.2020, and the request for compliance of British installation is 127 M. The total effect should be slightly bullish.

The mild temperature of last week are almost over and soon it will be required to heat more on central Europe because of cold coming with the same bullish effect.

The week end was monopolized by information that corona virus is spreading in Italy and southern Europe which is having a temporary bearish effect on market, providing some interesting buying opportunities.

We expect the market to hit on this wave of temporary panic some levels around 25 Euro/EUA.

Screenshot 2020-02-25 at 00.12.07

Source: AitherCO2 and ClearBlueMarkets, London

For English, please press here.

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The International CO2 Market

Brexit Effects on the EUA Price

Brexit is coming into force, officially starting  on 1st February 2020. The country will enter a transaction period valid until the end of 2020. According to this, UK has been in EU ETS for the whole 2019 and only for 1 month of 2020. UK will most likely has to comply for 2019. In this case it has to issue also the free allocation and the auctionable EUAs. Depending on how fast it will release all those EUAs, it might be that the market will have an impact on the downside.

UK could issue EUAs in two different way: tagged EUAs or untagged. In the first case, EUAs won’t overflow the market. In the second case it might be the case.

In case no issuance at all happens and the UK only does a UK carbon tax, no overflow will happen and the market will grow up to 25 eur/ton.

There are still a lot of uncertainties, in any case the market deep achieved in these days can be a good buy opportunity for short industrials that has to buy for compliance.

The EUA price closed yesterday on the ICE ECX exchange from London, 03.02.2020 at Eur 23,12.

Tighter market in 2021 will attract investors back to EU carbon -analysts

EU carbon allowances will struggle to rise much beyond current levels until later this year, when a return of speculative investors eyeing a tighter balance in 2021 could propel prices to a record above €30, analysts predict, citing early signs of buyers potentially returning.

World’s carbon markets grow 34% in value to $215 billion in 2019 -report

Published 02:34 on January 22, 2020  /  Last updated at 16:45 on January 23, 2020  /  Africa, Americas, Asia Pacific, Australia, Aviation/CORSIA, Canada, Carbon Taxes, China, China’s National ETS, China’s Offset Market, China’s Pilot Markets, EMEA, EU ETS, International, Kyoto Mechanisms, Mexico, Middle East, New Market Mechanisms, New Zealand, Other APAC, South & Central, South Korea, Switzerland, US  /  No Comments

Global carbon markets grew by 34% in 2019 to hit €194 billion ($215.1 bln) in value, according to analysts at Refinitiv, marking a third straight year of growth and a nearly fivefold increase in two years.

In a report published Wednesday, the company said the value of almost every major carbon market worldwide had increased markedly year-on-year, in spite of overall trading volumes dipping by some 370 million tonnes or 4% to 8.73 billion tonnes.

A surge in allowance prices in the EU ETS was the primary driver for the rise in global carbon markets’ value, with the average jumping by some €9 to near €25 between 2018 and 2019.

The European carbon market – the world’s largest by volume and value – rose in worth by 30% to €169 billion to make up by far the largest share of the global total, despite a 12% drop in traded EUA and EU Aviation Allowance (EUAA) volumes to 6.78 billion.

Source: Rueters Point Carbon, London & IETA, Geneva

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The EU Finance for Climate Change 21.01.2020

Brussels proposes ‘just transition’ fund in €1 trillion green investment plan

The European Commission on Tuesday unveiled a €1 trillion investment plan to help meet the EU’s climate goals, seeking to divert 10% of the funds towards a “just transition” mechanism for fossil fuel-dominant regions, and potentially channelling aid to ETS installations. This measure could be among the first ones to help achieving the neutrality goal proposed before COP in December as the „European Green Deal”.

Key outcomes agreed at the UN climate talks in Madrid in December 2019

  1. Matters including Article 6, reporting requirements for transparency and “common timeframes” for climate pledges were all punted into 2020, when countries are also due to raise the ambition of their efforts.
  2. On 12-13 December, EU heads of state met in Brussels and agreed to make the bloc “climate neutral” by 2050. Despite resistance from Poland, which has until next summer to come onboard, the European Commission revealed a “European Green Deal”, which, if it becomes law, will commit at least 25% of the EU’s long-term budget to climate action.
  3. The conversation around Article 6 is technical and full of jargon, yet the way the rules are designed could “make or break” the entire Paris Agreement. This high-stakes situation was a key reason for failure in Madrid.

EUA Price increased

The carbon price opened, today, at €25,17/tCO2 at the ICE ECX exchange in London. EUA Dec-20 increased by €1.23 last week and closed at €25.44 (+5.08%). Traded volumes increased compared to the previous week with 120.9Mt versus 96Mt exchanging hands on ICE across contracts. The total Open Interest decreased by 6.3Mt for a total of 808.5Mt.

Screenshot 2020-01-20 at 17.43.46

Source: Point Carbon, Clear Blue Markets, London & CPLC, Washington

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The European Carbon Market

The European Commission unveiled its wide-ranging ‘European Green Deal’ on Wednesday, 11.12.2019 which aims to combat the effects of climate change, reduce the decline of the biodiversity, reduce pollution, and shift to a clean circular European economy.

This includes a legislative proposal to enshrine a 2050 net zero emissions target into law by March 2020. Snubbing lawmakers call to immediately propose a deeper 2030 goal.

The plan foresees additional annual investments of € 260 billion in the first decade alone, equivalent to 1.5% of the EU’s gross domestic product in 2018.

In the long term, the Commission estimates that at least 25% of GDP will have to be allocated to actions to combat change and promote the transition to a “green” economy.

The announcement has been made with the occasion of COP25, which has been going on in Madrid these days and has generated a price increase around the value of 25 Eur/tCO2. At the current time, the EUA is traded at 24.63 Eur at the ICE ECX exchange from London.

Source: The European Commission, Brussels and ICE ECX, London

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Regional and International Negotiations on Climate Change

An EU Commission document recently leaked by Greenpeace outlines a European Green Deal currently being drafted and 24.50 planned to be published on December 11t with the occation of the UN COP25 Summit on climate change held in Madrid these days (2-13 December 2019.

The document states that the Commission will propose the first ever European climate law that enshrines the 2050 climate neturality target and 24.00 will be enforced by March 2020. By October 2020, the

The Commission will also be releasing a comprehensive plan on how to increase the EU’s GHG emission reduction target for 2030 23.50 from 40% to at least 50% and towards 55%.

The increased 2030 target from 40% to 50-55% likely means fewer EUAs will be supplied over the next decade which would be very bullish for the EU ETS market which is already expected to witness significant shortages based on our analysis. The Netherlands has already announced that it supports this plan and will introduce sharper measures at national level.

The market has already reacted to this document news and the price decreased 3% in the last two days; current futures price on the ICE is 24.40 Eur/EUA.

November EUA Price

Screenshot 2019-12-03 at 11.42.14

Source: ClearBlueMarkets, London

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The Carbon Market 20.11.2019

The EU Tightens EU ETS Free Allocation Rules

The European Commission adopted regulations that will allow it to amend the volume of EU emissions trading system (ETS) allowances that an installation receives for free, in response to changes in that installation’s activity. The rules will apply during the carbon market’s fourth trading phase, from 2021-30.

Under the revised EU ETS directive, the main piece of legislation covering the carbon market, the EU can adjust an installation’s free allocation when its operations decrease or increase by more than 15%. The new rules adopted allow for further adjustments to free allocation, after this initial change has taken place.

The aim is to make sure that industrial firms only receive the amount of free carbon credits they need to cover their actual emissions. In particular, it aims to avoid windfall profits, whereby firms receive more free allowances than they need and sell the spare permits to generate cash.

The EU may consider further changes to free allocation in the 2020s, if the bloc sets a more ambitious emissions reduction target for 2030 — an aim supported by the president-elect of the incoming commission. Ursula von der Leyen is also considering an EU-wide carbon border tax policy, a move that is likely to see industrial firms lose their free allocation in the carbon market.

The EUA Price

The ICE ECX exchange from London closed yesterday, 19.11.2019, at 23.44 Eur/EUA. The ccarbon price decreased with at least 1 Euro in the last week because of bearish reactions to a lack of firm EUA cancellation plans in Germany’s coal phaseout bill triggered selling.

Germany will next year begin the process of phasing out its hard coal-fired power plants, according to draft legislation, with a decision on cancelling a corresponding number of EUAs appearing to be postponed until at least 2022.

Source: AitherCO2 and Point Carbon, London

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The CO2 Market 05.11.2019

US Policy undermines international treaties on climate change

The United States government began yesterday, 4th November 2019, its formal withdrawal from the Paris Agreement.

The US government announced that it had notified the UN of its intent to withdraw from the Paris Agreement. Under the terms of Article 28 of the agreement, yesterday was the earliest that such a notification could be issued and will take effect in one year. This follows US President Donald Trump’s statement in June 2017 that the country would withdraw from the deal as soon as practically possible.

Moreover, the US has major concerns about the EU’s and China’s approaches to the international aviation agreement on CO2, CORSIA, and we could have ahead a crunch deadline of this agreement too.

Last month, the Trump administration sued California state to shut down California’s emissions-trading market designed to limit air pollution, claiming it is unconstitutional because it is run in cooperation with the Canadian province of Quebec. The lawsuit contends that international pacts such as California’s cap-and-trade program can be agreed to only by the federal government, or with its blessing.

Source: IETA & Carbon Pulse

The EU ETS Market

The market has now been trading around the €25 area for the 3 past weeks and appears to be directionless. For this reason, we will stay neutral as we wait to see what the next price movement could be. The important resistance and support levels to watch are €24.30 and €26.30 as a break of one of those levels could see the volatility increase.

Screenshot 2019-11-05 at 16.08.29
Source: ClearBlueMarkets
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