The Carbon Market 06.03.2019

EUAs spent most of the day bubbling just under the €23 mark. Prices made three attempts to move above this level but failed. Consequently, traders started to sell by around 16.30 CET and levels dropped sharply through to the close. Carbon ended the day down 3.6% at €22.11, just a cent above the day’s low.

The €5 price rise over the last past eight days proved too attractive to pass up for the market, and speculators cashed in. The rally may well be over for now, but the continued absence of investor selling (as opposed to speculators) suggests that the gains of the last week may well be consolidated rather than given up.

Two days ago, Bloomberg New Energy Finance has published new analysis in which it forecasts that the Total Number of Allowances in Circulation (TNAC) will shrink from 1.686 billion EUAs in 2018 to 1.465 billion in 2019. the implication is that net demand for EUAs from the surplus will come in at around 278 million EUAs.

Distribution of free EUAs for 2019 is now well under way, with member states having completed more than 60% of their allocation for the year. This may dampen market demand from continental installations who may be tempted to borrow from their 2019 allocation rather than pay the current high prices. Yet, compliance season continues, and while industrials may have become more proactive in their risk management, there are still enough installations that continue to pursue a “once-a-year” buying strategy to suggest that underlying demand will remain reasonable.

Today’s chart

Today’s close at the day’s low suggests that there is still some selling to come, so we should anticipate further weakness on Thursday morning at least. We’re back within range of the €21.83 support that held firm in mid-January and early February. Below that the region around €20.55 offers some support, and finally the strong € 19 support is not an impossible target either.

Source: Carbon Reporter, London

The CO2 Market 04.02.2019

Volatile CO2 Price and Increased Demand

Today, 04.02.2019, carbon successfully defended the support at €21.36 before embarking on a rally that gained momentum as the day drew on, and eventually climbed back above €22.00. EUAs closed up 4.8% at €23.05. Carbon’s advance was in contrast to power and gas which both retreated by 0.5%, and coal which shed 1.4%.

Supply of 10.6 million EUAs at auction this week is sandwiched between two weeks where more than 15 million allowances are being sold, and this pattern will repeat itself throughout the year. Today’s sale saw 105 separate bids, well above the average of any month since last summer. In addition, January saw an average of 30 bidders participate in each EEX auction, the highest on record.

It’s clear from this data that demand is healthy, if not increasing, and it will be worth watching auction results in the coming month to see if the market has been encouraged to buy while prices remain below recent highs.

Today’s chart

Technically, Friday 01.02.2019 and today’s price action (04.02.2019) completes the “double top” pattern that takes in the respective peaks of January 1 and January 23. The decline since January 23 has reached parity with the drop that ended on January 10, and today’s gain may possibly be the start of a renewed rally. However, we would be cautious before setting a price target, and today’s move needs to be consolidated first.

Source: Carbon Reporter, London

The CO2 Market 15.01.2019

Implications on MIFID II rules on the carbon market

Today, 14.01.2019, the CO2 certificate closed at the ICE ECX stock exchange in London at a price of 22.58 Euro / EUA. Participants on this exchange attributed a slight decrease of 0.7% compared to Friday, 11.01.2019, to low energy and gas prices. Tomorrow, a higher volatility is expected as a result of the political news, particularly the vote on the Brexit Agreement in the British Parliament.

Starting from 1st January 2019, all corporations that participate in financial transactions, including trading of emission allowances in the EU ETS, should be issued the Legal Entity Identifier (LEI).

The Legal Entity Identifier is a unique identification of legal entities participating in financial instruments. The Markets in Financial Instruments Regulation (“MIFIR”) came into force forming part of the wider legislative package introduced by the Markets in Financial Instruments Directive 2014/65/EU (“MiFID II”). Amongst other matters, it introduces requirements for entities participating in financial transactions to be identified through a Legal Entity Identifier (“LEI”) code.

The Local Operating Units (or LOUs) are issuing LEI numbers, and you have to apply there to get your LEI number: https://www.lei.direct/lei-services/your-lei-in-3-steps/

If you need advice in acquiring LEI, please get in contact with us. If you already acquire it, please send us for subsequent CO2 trades.

For information related to the set of documents requested before trading, we remain at your disposal.

Source: European Commission, Brussels and AitherCO2, London

The Carbon Market – 2018 Retrospective

UNFCC COP 24 concludes in Katowice

The UN Climate conference ended in December 2018, after two weeks of intense negotiations on ways to put the Paris agreement into practice. One of the major discussion points included how to account for and record green house gas emissions. Crucial issues such as what countries would do to limit temperature rise to below 1.5 degrees as was stated in the IPCC report were ignored. A decision on carbon markets was pushed to next year’s COP meeting as countries failed to reach an agreement. Climate experts have criticized the agreements drawn from the conference as being inadequate and not urgent enough to address the climate’s current challenges.

Countries pledge tougher CO2 cuts

A group of developing countries, the EU, and Canada have committed at COP24 to set tougher targets to cut greenhouse gases and raise their countries’ targets by 2020. They have resolved to put in extra measures to go beyond what had been agreed upon at the COP conference. Practical ideas on how this would be done was however not discussed and how they intend to achieve these goals is to be seen.

Market Stability Reserve comes into effect as of 1st January 2019

As of 1st January 2019, the Market Stability Reserve will officially begin working. The MSR was set up to eliminate the surplus of emission allowances that has been accumulating in the EU ETS since 2009. 265 million EUAs will be placed in the reserve between January and August of 2019. Volumes will be significantly reduced in comparison to the previous years and this is expected to hike carbon prices as a result.

Yesterday EUA closing price on ICE EXC exchange from London was 22,84 Euro.

UK auctions and free allocations suspended

The European Commission has announced the suspension of all EUA sales issued by the UK as of 1st January 2019 until a Brexit deal between the UK and the EU is settled upon. This means that the UK will not auction or allocate allowances. Allowances already in circulation will not however be affected. The UK will leave the EU ETS immediately if a Brexit deal is not agreed upon. The absence of UK auctions and the German auctions that are yet to be confirmed is expected to keep prices high as the new year begins with less supply.

Our attention looks to next Tuesday, 17.01.2019, when the UK Parliament will vote the withrawal agreeement from the EU.

Source: European Commission, Brussels and AitherCO2, London

The Carbon Market 28.11.2018

The ICE exchange from London closed yesterday, 27.11.2018, its trading operations on CO2 and energy, as follows:

• EUA Dec ’18 futures: € 19.65
• CER Dec ’18 futures: € 0.28
• Brent Crude Jan’19 futures: $ 60.75

Today’s price action provided further evidence that the market is beginning to slow down ahead of the end of the year and the expiry of the December contracts. EUAs closed down 0.9% at €19.65. In addition, the EU Council approval of the Brexit withdrawal agreement appears to have calmed some nerves, but the outcome of ratification in the UK parliament is by no means certain, and surprises may yet disturb the market.

In our opinion, there is no trend in place, other than very high volatility, and prices are likely to continue to fluctuate very widely for the next two to three weeks. EU carbon prices will rise by at least 60% to above €30 early next year as the onset of the MSR squeezes the market, analysts predict.

Regional and International Meetings

In the framework of the Three Seas Initiative – a European debate forum comprising 12 countries from Central and Eastern Europe, with the exit to the Baltic Sea, the Mediterranean Sea and the Black Sea, our CO2 international expert, Dr. Casiana Fometescu, was invited to represent Romania at the conference “COP24 and the Future of Climate Policy: What is the Role of the Three Seas Initiative”, organized in Poland, last week. On this occasion, Casiana Fometescu held in Warsaw on 22nd November 2018 a presentation titled “Romania’s Climate and Energy on the Path to the 2030  and 2050 EU Targets Achievment”. If you wish to receive the presentation, please contact us at info@carbonexpert.ro

At the same time, Casiana Fometescu will represent us at the UN Climate Change Conference and Summit, organized in Katowice/Poland, from 2nd to 14th December 2018.

The CO2 Market 17.10.2018

The ICE exchange from London has closed yesterday, 16.10.2018, its trading operations on CO2 and energy, as follows:

• EUA Dec ’18 futures: € 19.48
• CER Dec ’18 futures: € 0.29
• Brent Crude Dec’18 futures: $ 80.98
• German Power Q4 2019: € 51.050

The Global Warming Scientific Data

“The world must cut CO2 emissions 45% below 2010 levels by 2030 and achieve net zero emissions by mid-century if it is to stand a chance of limiting global warming to 1.5C”, the Intergovernmental Panel on Climate Change (IPCC) said on 10th October 2018, in a report highlighting the far-reaching differences in impact between 1.5C and 2C of warming.

The Special Report on Global Warming of 1.5°C will be a key scientific input into the Katowice Climate Change Conference in Poland in December, when governments review the Paris Agreement to tackle climate change. The EU emission reduction targets on medium term is in line with this trend (40% reduction by 2030 compared to 1990 levels), but it is likely to be revised.

The report highlights a number of climate change impacts that could be avoided by limiting global warming to 1.5°C compared to 2°C, or more. For instance, by 2100, global sea level rise would be 10 cm lower with global warming of 1.5°C compared with 2°C. The likelihood of an Arctic Ocean free of sea ice in summer would be once per century with global warming of 1.5°C, compared with at least once per decade with 2°C. Coral reefs would decline by 70-90 percent with global warming of 1.5°C, whereas virtually all (> 99 percent) would be lost with 2°C.

The report finds that limiting global warming to 1.5°C would require “rapid and far-reaching” transitions in land, energy, industry, buildings, transport, and cities. Global net human-caused emissions of carbon dioxide (CO2) would need to fall by about 45 percent from 2010 levels by 2030, reaching ‘net zero’ around 2050. This means that any remaining emissions would need to be balanced by removing CO2 from the air using advanced technology.

Source: IPCC Report, 10 October 2018

The CO2 Market 26.09.2018

The ICE exchange from London has closed yesterday, 25.09.2018, its trading operations on CO2 and energy, as follows:

• EUA Dec ’18 futures: € 21.29
• CER Dec ’18 futures: € 0.29
• Brent Crude Dec’18 futures: $ 81.19
• German Power Q4 2019: € 54.50

Strategy for long-term on EU greenhouse gas emissions reductions

The European Commission has launched a stakeholder consultation on the strategy for long-term greenhouse gas emissions reductions.

The consultation is open until October 9 and the Commission plans to release the final version of its long-term strategy ahead of COP24, taking place at the beginning of December in Poland. The strategy, likely released in the form of a Communication, will indicate an aspirational target, but will stop short of setting binding targets.

The first question presents three options for EU’s 2050 target, in light of the Paris Agreement commitment:

• Reduce GHG emissions by 80% by 2050 compared to 1990 levels
• Reduce GHG emissions in the range of 80 to 95% by 2050 compared to 1990 levels
• Achieve a balance between emissions and removals in the EU by 2050.

In case you are interested to contribute, you can access it here.

On the same topic, OECD released a report on Tuesday, 18.09.2018 concluding that governments need to raise carbon prices much faster if they are to meet their commitments on cutting emissions and slowing the pace of climate change under the Paris Agreement.

Source: European Commission, Bruxelles and Thompson Reuters Point Carbon, London

The CO2 Market 23.08.2018

The ICE exchange from London has closed today, 23.08.2018, its trading operations on CO2 and energy, as follows:

• EUA Dec ’18 futures: € 20.41
• CER Dec ’18 futures: € 0.30
• Brent Crude Dec’18 futures: $ 74.66
• German Power Q1 2019: € 55.20

EU carbon prices surged by almost a euro with 3.1% within the day to extend their 10-year high for a second successive session on Thursday, 23.08.2018, as power prices climbed and analysts revised their near-term and medium forecasts upwards after underestimating the year’s stellar gains.

EU carbon allowances are expected to continue to climb for the rest of the year as speculators keep buying in anticipation of further increases and utilities lend support, analysts said, following several weeks of strong price increases that have already pushed prices to their highest for a decade.

EU carbon prices could average €35-40 over 2019-2023, accelerating coal-to-gas power switching and potentially questioning the rationale for keeping old coal and lignite power plants running beyond 2021, analysts said on Tuesday, according to Thomson Reuters Point Carbon. They have adjusted their average price forecast for 2018 to €20, and say the price could reach €25 before the end of the year.

For your daily trading operations or any speculative tradings, we are here to help you!

Source: Thomson Reuters Point Carbon and Carbon Reporter, London

Innovate4Climate 2018

Casiana Fometescu, international consultant on CO2 issues from Carbon Expert has attended Innovate4Climate conference, which took place last week in Frankfurt, on 22-24 May 2018 in Kap Europa Congress Centre.

This year, Innovate4Climate has been the place where finance, business, technology, and policy leaders met to drive climate investment in future carbon low technology.

Climate action at unprecedented speed and scale is essential for making the investments required to avoid the effects of a 2 degree warmer world and meet the Paris climate commitments. In a world of constrained public resources, traditional forms of concessional finance will not be sufficient to fund the investment required for a transition to a low-carbon future. Scaling up and accelerating access to finance – from multiple sources, as efficiently and effectively as possible – to redirect the trillions of dollars sitting in unproductive, low yielding as well as unsustainable investments towards longer-term, climate-smart investments will be key.

Innovate4Climate 2018 has convened global leaders from industry, government and multi-lateral agencies for a one-day high level Summit, and two days workshops and a Marketplace, to work and dialogue on development of innovative financing instruments and approaches to support low-carbon, climate-resilient development pathways; mobilization of private investments in climate action; support to developing countries in their NDCs implementation; development of ideas on how market-based and non-market based climate finance instruments identified in the Paris Agreement can best be designed to maximize impact and minimize costs.

For more information on how to calculate and reduce the company’s carbon footprint and get funding for your investment plan in technologies that increase the company’s energy efficiency, please contact us. Also, if your project already involves a significant reduction in CO2 emissions in the atmosphere, we can help you get carbon credits for these CO2 emission reductions.

The Carbon Market 24.05.2018

CO2 emissions covered under the EU ETS rose by 0.3% in 2017, according to EU ETS verified data for 2017 published by the European Commission on 19th May 2018, confirming the small increase both reported in preliminary data released in April and predicted by analysts.

An increase had been widely forecast due mainly to increased coal generation as nuclear plants suffered reliability problems and hydro generation was very low in many parts of Europe. Yet, carbon price has risen almost double since the start of 2018 while oil, power, and natural gas are all 20% higher than they were at the beginning of 2018.

While the EU compliance was reaching its climax, the speculative trades continued to support the European carbon market, betting on higher prices in the coming months. April’s open interest in call options for December 2018 EUAs has risen to 207 million tones CO2, while put options show a total of 139 million tones CO2.

Analysts in mid-April raised their price forecasts for 2018 by around 30%, especially because of this speculative element of the CO2 market, which continues in May, as well.

Yesterday, 23.05.2018, EUA closed up at Eur 16.01, the highest level since 2011, after a long steady recovery. This consolidation may give traders encouragement to add length, and given the scale of recent price moves, this may bring more rise of the price into play.

At the same time, on 15th May 2018, the European Commission published the Total Number of Allowances in Circulation into the EU ETS (TNAC), which amounts to 1,654,574,598 allowances.

This means that between 1 January 2019 and 31 August 2019 264,731,936 allowances will be withheld from EU ETS auctions and placed in the Market Stability Reserve (MSR). This represents 16% of the TNAC over this 8 month period.

When the MSR starts operating in 2019, it will absorb each year 24% of the allowances in circulation if this figure is above 833 million allowances. From 2024 onwards the intake rate declines to 12%. The first review of the functioning of the MSR is scheduled to take place in 2021.

The Market Stability Reserve is another reason for the CO2 price increase together with the speculative trend.

Given these moves and forecasts, forward transactions we highly recommend Romanian installations to secure the price for the expected CO2 trades. This means that the price is locked up at the current level while payment is done at an agreed future time, possibly closed to the next surrender.

The Italian company, Aither CO2 has entered for the first time, this year, into Romanian carbon market, helped by the Romanian consultancy Carbon Expert. They won both tenders at BRM exchange as well as state and private company tenders, with revenue on the Romanian CO2 market of more than 12 milion Euro.

We are looking forward to seeing your interest in forward transactions due to the current risen trend of the EUA price.