The CO2 Market – 24.11.2021

EUAs rise to new high above €72

EUAs rose to a new record reaching €72.91, the closing price on the ICE ECX exchange from London on 24.11.2021, ignoring weaker gas and power markets that reacted to growing concern over rising Covid-19 infection numbers and growing social unrest over renewed public restrictions in a number of countries.

EU watchdog: “no proof of carbon market manipulation”. Truth or manipulation?

In a preliminary report published on 19.11.2021, the European Securities and Markets Authority (ESMA) found no proof of illegal market speculation in the EU’s carbon trading market (the emissions trading system, EU ETS).

In October, the European Commission asked ESMA to track any possible market manipulation after accusations hedge fund speculators drove up prices in Europe. The move is part of a toolbox of policies against soaring energy prices.

ESMA found 455 financial entities and investment firms took part in the EU ETS market in 2021, up 86 percent from 2018. ESMA’s findings attribute the surge in the price of carbon allowances to normal market behaviour, driven by a faster-than-expected reduction in emissions allowances and increased demand and sharp volatility of energy commodities.

Although no proof of foul play has been found, the watchdog noted that it had only limited access to essential data. The Intercontinental Exchange (ICE), where most carbon was traded until June 2021, fell under the UK’s Financial Conduct Authority, and due to Brexit, ESMA could not access this data.

We remain reticent about the EU watchdog findings as most probably 50% of the data of the EU ETS trades have not been analyzed due to lack of the access to the data. Starting with 2019, the EU ETS market has been included into the financial market within MIFID II directive, and the interest of investment funds into this market has been, therefore, increased. This fact is shown by increasing number of players on this market (86% higher than the previous year, 2018). The rise in demand is determined, consequently, by the financial game of the new capital funds and less by new polluting installations, which should normally have been those who buy these carbon allowances. Where will this practice go? Probably, at a price of over 100 euro/tCO2 so that the national energy industry collapses as soon as possible and we become dependent on the import of energy and gas.

Source: ICE ECX and World Bank

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