The CO2 Market 23.10.2019

CO2 prices rise for second consecutive week stopped today its uptrend course

Developments surrounding the UK’s exit from the EU set the direction of travel for EU carbon prices these two weeks, as prices climbed ahead of a vote in UK parliament that had been expected to confirm the country’s future involvement in the carbon market.

Carbon prices lost value in three of the five trading sessions last week, but still posted a weekly increase thanks to strong gains on 15 and 16 October, when prices rallied on expectations that the UK and EU would agree a Brexit deal ahead of an EU summit on 17-18 October. Yet, the British MPs later effectively voted for an extension of the Oct. 31 EU exit date, and prices began to drop, being at present time 25,20 Eur/tCO2.

The fate of the Brexit deal continues to impact the EU emission market

The fate of the Brexit deal has considerable implications for the EU ETS. If parliament approves the deal, the UK would remain in the carbon market until the end of 2020. This would also confirm that UK emitters must buy allowances to cover their emissions for 2019 and could create a surge of demand. This outcome would see the return of UK auctions and free allocation, which have been suspended throughout 2019.

Under a no-deal Brexit, the UK would exit the carbon market with immediate effect. UK emitters would not face ETS obligations for the 2019 calendar year.

EU carbon a “tricky” trade for now, but headed to €100 in two years, investor said to Carbon Pulse on 18.10.

Trading in EU carbon has become “very tricky” this year compared to last due to Brexit and a reversal in short-term fundamentals, according to one of the market’s most prominent long-term bulls, who predicts prices will top €100 early next decade.

Source: Carbon Pulse & AitherCO2