The Carbon Market 07.03.2018

In February, Carbon Expert through Casiana Fometescu represented the Italian company AitherCO2 in the tender organized by Electrocentrale Bucharest (ELCEN) for “The acquisition of 1,300,000 greenhouse gas emissions certificates for compliance”, and AitherCO2 was declared the winner of the auction.

Carbon Expert and AitherCO2 inform you about the most important issues and recent European standards that you need to consider in order to plan the CO2 exposure in the next period and invite you to submit us your trading requests.

EU-ETS Reform 2021-2030

Last week, the EU nations finally signed off on the comprehensive post-2020 EU ETS reform package.  The most important changes that will affect the EU-ETS directly are the followings:

•  The cap will decrease of 2.2% rate per year, compared to the current level of 1.74% in linear reduction factor, which means less free allocation for installations;
• The Market Stability Reserve (MSR) will double to 24% of permits in circulation over a 5 year period; starting from 2023 the allowances held in the reserve above the total number of allowances auctioned during the previous year would be cancelled; this means few carbon certificates on the market, and consequently increase in the EUA price;
• Any excess allowances held in the registry from this phase 3 (2013-2020) will be eligible to be used in the next one. But nowhere it is stated that EUAs from phase 4 free allocation will be eligible for the 2020 compliance (the last compliance from phase 3). This means that it is possible that companies need to buy more EUAs as initially planned for compliance 2020;
• Starting from 2020, CERs will not be eligible for compliance purposes under EUETS.

The use of CERs/ERUs

It is important to take into consideration the possibility to use of CERs/ERUs for compliance in the current phase 3:

• The use of CERs/ERUs in phase 3, for companies that were in the EU-ETS before 2013, is possible for an amount of CERs equal to the 11% of the whole amount of Verified Emission from 2008-2012;
• For companies that enter the EU-ETS starting from 2013, an yearly amount of CERs/ERUs equal to the 4,5% of the verified emission of that year can be converted into EUAs.

On Monday, EUAs climbed to a fresh six-year high as bullish sentiment grew after one of the strongest auctions of the year and as EU ministers gathered to discuss carbon price floor options. Ministers from six EU nations met in Brussels on Monday, 05.03.2018 to discuss further initiatives, aimed at bolstering European carbon prices, but stopped short of launching a coalition to form an EU price floor.

All this updates are driving a positive trend in market prices for the EUA benchmark contract that is now trading above 10,43 Euro/EUA.

For any further questions related to your greenhouse gase emissions needs, please don’t hesitate to contact us.