The Carbon Market – 29.06.2021

The EUA price on London based exchange ICE ECX opened on 29.06.2021 at 55.20 euro/tCO2, continuing its 5 weeks increase.

“Despite a week-long rally that has added more than 6% to EUA prices, carbon needs to rise even higher in order to restore natural gas’ advantage over coal in EU power generation”, updated news from Carbon Pulse 28.06 show.

EU ETS Free allocation up to €50 billion from 2008 to 2019

A new CE Delft study published on 7th June 2021 shows that the energy-intensive industry across Europe has profited up to €50 billion from 2008 to 2019 as a result of the free allocation of pollution permits under the EU Emissions Trading System (EU ETS).

The findings in the report from independent environmental consultancy CE Delft highlight the need to end this market failure as the EU carbon market rules are revised.

The sectors profiting most from pollution payouts are iron and steel, refineries, cement and petrochemicals sectors.

The report covers 18 EU countries and the United Kingdom. Most profits were generated in Germany, the UK, France, Italy and Spain.

The report identified three ways in which industry has secured a total of up to €50 billion windfall profits through the scheme from 2008 to 2019:

• Companies passed through the “costs” of freely obtained emission allowances in the product price, paid for by the end-consumer. For example in the iron and steel sector (€12- 16 billion) and refineries (€7 – 12 billion);
• Companies were awarded too many free emissions allowances that they could sell for a profit on the market. For example in the cement sector (€3.1 billion) and petrochemical sector (€600 million);
• Companies bought cheaper international offsets (until 2020) to comply with their targets and were able to sell remaining free allowances for a profit on the market. For example in the iron and steel sector (€850 million), refineries (€630 million) and cement (€610 million). These amounts should have been used to modernise the technology, in order to reduce the CO2 emissions, but they were ofen redirected to pay debts of companies.

More information on CE Delft analysis: Additional profits of sectors and firms from the EU ETS 2008-2019.

Source: Carbon Market Watch, Brussels

EU ETS News in June

EUAs climbed above €53 on Wednesday, 23.06.2021, gaining steadily for a third straight day as energy prices moved higher and buyers were not put off by a weaker auction result.

EU plans new social fund from expanded carbon market

The European Commission will create a ‘climate action social fund’ with revenues from an expanded carbon market if it decides to bring emissions from vehicles and buildings under the EU ETS, the bloc’s climate chief Frans Timmermans said. The discussions to include in the EU ETS the transport and building sectors are currently at the European Commission level.

Romania and Poland to start closing coal units from 2030

A leaked document from Brussels announced plans of Romania’s government to phase out coal till 2032.

Poland’s main utility, Belchatow, will start gradually closing lignite generation units at the largest emitting installation in the EU ETS from 2030, according to a draft plan published by the Lodz regional government Tuesday.

Germany targets EU aviation allocation in carbon price stance despite pandemic problems

Germany favours the rapid end to free EU carbon allowances for airlines, according to a leaked document, increasing the pressure on the sector as it slowly recovers from the pandemic.

Source: Carbon Pulse, London

The CO2 Market – 12.05.2021

EUA price has reached a new record this week, exceeding the threshold of 50 €/tCO2. The daily upward trend of about 3-5% is due to a growing demand from investors as a result of positive market signals regarding the approval of European climate law and political statements of European leaders, which encourages the CO2 free market and rising prices. Today, the EUA certificate was traded between € 53.15 and € 54.70 / EUA.

The European Climate Law

The European Parliament approved on Monday, 10.05.2021  the European Climate Law proposed by the European Commission on 20th March 2020. As one of the key elements of the European Green Deal, the European Climate Law enshrines the EU’s commitment to reaching climate neutrality by 2050 and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. This agreement on the European Climate Law is a key milestone for the  European Commission, delivering on one of the commitments announced in the President’s Political Guidelines in July 2019.

In addition to the 2050 climate neutrality target, the agreement strengthens the European framework for climate action by introducing the following elements:

• an ambitious 2030 climate target of at least 55% reduction of net emissions as compared to 1990, with clarity on the contribution of emission reductions and removals;
• recognition of the need to enhance the EU’s carbon sink through a more ambitious LULUCF regulation, for which the Commission will make proposals in June 2021;
• a process for setting a 2040 climate target, taking into account an indicative greenhouse gas budget for 2030-2050 to be published by the Commission;
• a commitment to negative emissions after 2050;
• the establishment of European Scientific Advisory Board on Climate Change, that will provide independent scientific advice;
• stronger provisions on adaptation to climate change;
• strong coherence across Union policies with the climate neutrality objective;
• a commitment to engage with sectors to prepare sector-specific roadmaps charting the path to climate neutrality in different areas of the economy.

Source: The European Commission, Brussels

The CO2 Market 13.04.2021

EU carbon prices hit a new record above €44 on Monday, 12.04.2021, extending last week’s top trade amid strong auction demand, a supportive energy complex, and bullish technical signals. The increasing trend toward €45 has been continued today with prices above €44 all day on.

Bloomberg forecast on the carbon price

According to Bloomberg, who released a market analysis on the 1st of April, “since mid-2016, however, allowances have been on a tear, increasing by a factor of 10 from just above 4 euros to 42 euros last month. After years of oversupply, the market is entering a period of expected future scarcity, financial investors are piling in, and prices are rising.”

The article pointed out that even higher prices are coming. BloombergNEF expects carbon prices to hit 100 euros/tCO2 by 2030, and 50 euro in the near future. Main reasons for this increase are the European decarbonisation targets, than in the medium term, we’ll see even more withdrawing of allowances, plus the end of power sector fuel-switching, in which “power fleet operators retire higher-emitting fuels such as coal in favor of lower- to zero-emissions options such as gas or renewable energy”.

From Carbon Expert’s twelve years experience on the European carbon market, we haven’t seen any of Bloomberg’s predictions that did not come true, and we are on the same opinion that all factors mentioned above will trigger the price on the uptrend in the middle run. We recommend the Romanian companies to do forward trades where the price is fixed now and the delivery of the credits and the payment shall be done at a later date, in one year or more.

The CO2 Market – EU ETS 31.03.2021

The EUA price on London based exchange ICE ECX opened on 31.03.2021 at 42.05 euro/tCO2. EUAs lifted slightly on Monday as last week’s late comeback and a stronger auction encouraged to bulls that prices could re-test the record levels seen earlier this month.

Morgan Stanley raises EU carbon price outlook to €50
Carbon Pulse from London published on 30.03.2021 that Morgan Stanley has raised its near-term outlook for EU carbon prices to above €50 on “positive” political signals and continued inflow of new investor capital into the market.

Brussels launches consultation on transnational CO2 transport networks

The European Commission has launched in March 2021 a consultation on cross-border CO2 transport networks, which could get priority access for EU funding as the bloc intends to kickstart the first large-scale CCS projects by the end of the decade, while environmentalist NGOs aim to expand the current scope to other modes of transport.

Moreover, the European Commission’s upcoming June package of energy and climate laws will “propose the extension of the emission trading scheme to sectors such as building and road transport,” the EU’s energy commissioner Kadri Simson said on Thursday, 25th  March.

The inclusion of both road transport and buildings into the EU’s cap and trade scheme for greenhouse gas emissions has been mooted ever since the new Commission took office, in December 2019.

Source: Carbon Pulse, London & Euractiv, Brussels

The CO2 Market 16.03.2021

The EU ETS Price

EU Allowances hit a record high above 43€ on Tuesday (15.03.2121), surging late on higher power, gas, and equities and as a Brussels official urged caution on possible carbon price controls.

The price of the EUA certificate on the ICE ECX London opened this morning (16.03.2021) the EUA trade sessions at  € 42,21 / tCO2.

The expectation of higher carbon prices may have prompted industrial firms to start hedging their emissions early this year. That added to demand for allowances—as did unusually cold weather, which boosted the demand for heating (the ets does not cover boilers in homes, but it includes large ones, such as those that heat many buildings). Speculators may have accelerated the price rise, by buoying futures prices. Around 230 investment funds hold futures linked to allowances, up from 140 in 2019. They account for only about 5% of the futures market, but it is a growing, bullish share. Long positions, or bets that the price will rise, have doubled since November.

Source: ICE ECX & Carbon Pulse London, Carbon Pricing Leadership Coalition

The CO2 Market 02.03.2021

The EU ETS Price

The price of the EUA certificate on the ICE ECX London opened this morning (02.03.2021) the EUA trade sessions at 37,17 € / tCO2.

Air pollution is killing thousands more people than Covid in the world’s biggest cities

The Covid-19 pandemic has led to a temporary fall in air pollution in many parts of the world, as economic activity has ebbed and movement restrictions have de-clogged congested cities. But smog was still a big killer in 2020, according to analysis from environmental group Greenpeace and Swiss air quality technology firm IQAir.

In the world’s five biggest cities, Shanghai, Tokyo, Dehli, Mexico City, and São Paulo, small particulate matter in the air known as PM2.5, which penetrates deep into the lungs, killed 160,000 people prematurely in 2020.

Particulate pollution causes health problems such as lung cancer, heart disease, stroke, and even diabetes.

Some studies have shown that air pollution makes it easier for people to contract the coronavirus, as well as develop more severe symptoms. One paper suggested that 15 per cent of Covid deaths worldwide, and up to 27 per cent of Covid deaths in East Asia, could be attributed to long-term exposure to air pollution.

Source: ICE ECX London & Eco-Business

The CO2 Market 23.02.2021

The EU ETS Price

The price of the EUA certificate on the ICE ECX London opened this morning (23.02.2021) the EUA trade sessions at 38,30€ / tCO2, continuing its downtrend from Fiday (19.02) as nice weather conditions are coming in Europe.

The EU started the infringement procedure in Romania for the legislation on industrial emissions

The European Commission sent a letter of delay to Romania on Thursday, 18.02.2021, asking it to bring its national legislation in line with the EU Directive on industrial emissions. This letter of formal notice is, in fact, the formal opening of the infringement procedure. Romania now has two months to remedy the shortcomings identified by the Commission. Otherwise, the Commission may decide to send them a motivated warning.

“The Romanian legal system does not guarantee the implementation of key objectives of the Directive, especially that the installations can operate only if they have authorization. On the one hand, in the current form, the Romanian legal system provides very small and inadequate penalties, which do not prove the efficiency, the proportionality and the deterrence required by the Directive. On the other hand, the Romanian authorities fail to implement current legislation in a coherent administrative way, implementing the imposed sanctions “, underlines the European Commission. Profit.ro
 

Source: ICE ECX London & Profit.ro

The CO2 Market 18.02.2021

The EU ETS Price

The price of the EUA certificate on the ICE ECX London opened this morning (18.02.2021) the EUA trade sessions at 38,18 € / tCO2.

EUAs continued their record-breaking rally into a fifth day on Monday (15.02.2021) in the last decade, with 40,60 € / tCO2. EUAs rebound to new high above 40€ on both Monday and Tuesday (15 &16.02) after intervention panic fades, clawing back ground lost late on Thursday and Friday (11&12.02) as traders dismissed the prospects of regulators curbing speculative trade anytime soon. EUAs fell for the third straight day on Wednesday (17.02) as a falling energy complex weighed, with carbon defying prevailing bullish sentiment and data showing speculative funds have become the market’s largest segment.

Fossil fuel subsidies amount to hundreds of billions of dollars a year

Despite an agreement at the G20 in 2009 to eliminate fossil fuel subsidies, the US, China and Russia alone spent US$909 billion (£656 billion) on them in 2017, the most recent year available – that’s nearly 40% more than in 2009.

A global study of gasoline prices between 2003 and 2015 showed that net fossil fuel subsidies increased by 5% each year.
Eliminating fossil fuel subsidies is not an optional extra in the effort to decarbonize the global economy, it’s central to the entire transition. But achieving widespread support for this will take political leadership, policy innovation and far greater funding.

Pollution from fossil fuels twice as deadly as thought, scientists warn

Air pollution from burning fossil fuels is causing more than twice as many deaths as thought, a study has found.
They calculated that in 2012 fine particles were a contributory factor in 99,000 deaths in the UK, more than double the estimate published in 2016 by the Royal College of Physicians of 40,000 deaths a year from all sources of outdoor air pollution. Almost one in five deaths in the UK is linked to fine particle pollution from road traffic, power generation and other activities that involve burning petrol, diesel, coal and gas, according to scientists from Harvard University and University College London.

Source: ICE ECX, Carbon Pulse, Bloomberg, & Energy in Demand, London

The CO2 Market 09.02.2021

The EU ETS Price

The price of the EUA certificate on the ICE ECX London opened this morning (09.02.2021) the EUA trade sessions at 38,10 €/tCO2.

EUAs continued their record-breaking rally into a fourth day on Monday in the last decade, with 39,80€ / tCO2, bolstered by higher energy prices as freezing conditions set in in parts of Europe and some observers predicted further gains for this week.

Exchange operator ICE announced today that it will relocate its EU carbon allowance trading from its London-based hub to the Netherlands in Q2 of this year due to Brexit-related limitations, it announced Monday.

ZF Live: Romania is the last EU country on investments in the environment

In an interview with ZF Live, the founder of Carbon Expert, Casiana Fometescu, stated that “Romania is the last EU country on investments in the environment, although there was funding. The situation of industrial polluting companies is a dramatic one, because they have to buy over 2 million carbon certificates by the end of April, each with a price of 38 euros”

You can watch the full interview in Romanian here :

https://m.zf.ro/zf-live/zf-live-casiana-fometescu-fondatoarea-carbon-expert-romania-ultimul-19906498

For more information on Romania’s situation compared to other European countries on pollution in recent years, as well as the percentage of revenues from CO2 certificate auctions in every EU country and invested in environmental projects, you can access the European Commission Report “2020 EU Climate Action Progress Report 2020“.

Source: ICE ECX, Carbon Pulse & Bloomberg, London & Ziarul Financiar