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

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

Source: ClearBlueMarkets, London