We would like to write in the following lines some considerations on the carbon market, in these difficult moments we are going through.
With the start of the war in Ukraine, the price of carbon on the European market EU ETS fell by about 40%, from Thursday (24.02), to Monday (07.03) from 94.97 euro/tCO2 euro to 57.93 euro/tCO2, prices traded on the stock exchange ICE ECX in London.
On the information channels of the foreign professional groups in which we participate, we were warned on Sunday evening (27.02) of the possibility of a market downturn, as a result of anticipating massive sales of certificates held by Russian oligarchs, fearing that their financial assets would be confiscated, as the physical ones were confiscated, and wanting to turn them into liquidity as soon as possible. The market started to decline quite slowly in the first days of March, but sustained. In other words, the news received was true, but no one could have predicted that the market would be so destabilized, no matter how big these assets were. We suspect that other investment funds also began to fear the market downturn and acted in the same direction of selling the certificates purchased in order to make a profit, even if less than they had estimated.
Suddenly, the European carbon market, which analysts say is directly proportional to the energy market, does not know how to explain the rising trend of prices (otherwise artificially inflated by the acquisition of EUA certificates made by the funds of investment and the rich people of this world), no longer had this trend, but behaved based on the rules of supply and demand and decreased dramatically, unlike the energy market, which grew during this period.
Romanian polluting companies breathed a sigh of relief that they can buy certificates at a slightly more reasonable price and started buying as soon as the price fell below 90 euros, in various volumes and according to their budget possibilities. Moreover, some of these companies, having a prudent management and knowing the intransigent EU policy regarding the acquisition of pollution quotas, have decided to buy for the compliance of the current year.
In Brussels, peace, panic … the reforms regarding the EU ETS market were postponed, put in second place and, rightly, the European decision makers had more serious problems to analyze and decide. From time to time, there was a statement (Friday, 04.03) from Frans Timmermans, head of the Green Deal, that the strategy of the European energy market must be rethought and we can resume coal-based activities in Europe, which made the price CO2 to decrease on Monday, 07.03, to the lowest level of 57.93 euro / tCO2. We note that this statement states that the “EU’s environmental objectives” should not be neglected, which was quite contradictory, but we are not surprised. Yesterday, 08.03, European Commissioner Ursula von der Leyer reaffirmed her confidence in the European environmental strategy and said: “We must become independent of Russian oil, coal and gas. … We need to act now to reduce the impact of rising energy prices, diversify gas supply sources for next winter and accelerate the transition to clean energy. ”
And the price of carbon, finally based on an optimistic statement, began to rise in a smooth manner, to 71.82 euros / EUA, at the time of writing this article (09.03, 15 o’clock), ie increased by 20 %, in one day. If you want to read the full statement of the European Commission yesterday, 08.03, please access here.
This is what the European carbon market looks like these days. It depends on the statements of political leaders, their decisions and actions, a geo-political conflict that can escalate at any time. No one can predict in what direction the price of the EUA certificate will go or if there will be another EU ETS market in a year or two. The European Union is not giving up on the climate targets set for 2030 (Fit for ’55), at least declaratively, because it would mean acknowledging that it has failed its own energy and climate strategy. He now claims that he is diversifying energy sources by importing hydrogen from renewable sources, neglecting his own resources, and that in a year’s time he will reduce his dependence on Russian gas by two-thirds. And we Romanians continue to be gullible, obedient and dependent on the decisions of the great international actors.