The Carbon Market – 31.06.2024

We present you the price of carbon certificates on the mandatory market in different regions of the world  Friday, 28.06.2024, as well as compared to last year’s price.

European Commission Adopts New Measures for EU ETS

At the beginning of this month, the European Commission published a communication regarding the Total Number of Allowances in Circulation (TNAC) within the EU ETS under the “Fit for 55” legislative package and the REPowerEU Regulation of 2022. This indicator is essential for the functioning of the Market Stability Reserve (MSR) and determines the number of allowances withdrawn or issued from the reserve.

According to the 2015 MSR decision, 24% of allowances are allocated to the reserve if the number of allowances in circulation exceeds the threshold of 1.096 billion. This policy change directly leads to a decrease in the volume of allowances available for auction. The notification from June 1, 2024, stipulates that 266,816,768 allowances will be placed in the MSR for 12 months, from September 1, 2024, to August 31, 2025. Additionally, the Commission indicated that 381,744,844 allowances from the MSR are no longer valid as of January 1, 2024. The TNAC indicator will be published on June 1, 2025.

All these changes, resulting in fewer allowances on the market under conditions of constant or increased demand due to the inclusion of the maritime system in the EU ETS this year, will raise the price of allowances in the medium term.

Aviation

Reuters published the opinions of some leaders in the aviation industry this month, highlighting Europe’s need to invest more in synthetic aviation fuels if it wants to achieve climate neutrality by 2050.

Sustainable aviation fuel (SAF) could reduce aviation emissions by up to 80%. There is a shortage of raw materials to produce enough fuel from organic materials, so investment in more expensive synthetic fuels made from hydrogen or carbon capture, known as e-SAF, will be necessary. The problem with these fuels is their high cost, which means only a few companies can afford them. The use of SAFs could positively influence the efficiency of the EU ETS Scheme in the aviation sector, helping companies better meet the imposed emission limits. However, greater investment from the European Union and a more uniform regulatory framework are needed.

Maritime

The maritime sector has been included in the EU ETS since January 1, 2024, and will be fully introduced by 2026. The first compliance deadline is September 2025, with 40% of emissions produced and reported from January 1, 2024, to December 31, 2024. According to Regulation 2023/2849 (the MRV Regulation for the maritime sector), if shipping companies do not report emissions for the entire year in accordance with this regulation, management authorities are responsible for conservative estimates.

Source: European Commission, Aither Group, Carbon Credits