Weekly carbon trading update – 3rd July, 2017

Market developments

  • The week closed on Friday 3,07% up at €5,03.
  • Thursday registered a there weeks high at €5.14.
  • Euro highest 14-month rates against the dollar and 7% gains in German clean dark spreads behind EUAs gains.

EU Allowance Auction Overview

  • Auction volumes this week up from 21.5Mt to 22.1Mt
  • Increased July auction volume (~91.5Mt) coincides with the beginning of usual quitter period for utilities hedging

Carbon Forward 2017 Programme has been released

Register your interest to receive the programme and be kept up to date with the speaker and sponsor updates, including early-bird specials and the special rates that Redshaw Advisors have negotiated for industry with emissions below 1Mt per year – up to 70% off! See ‘Other News’ for more information.

EUA Price Action

The week started down from previous week as we were expecting closing at €4.79 from €4.88. Tuesday and Wednesday prices saw a gain of 3.3% although remained under €5 despite power prices gains were already materialising across Europe. Thursday coupled with a Euro hitting 14-months high against the dollar to above $1.14 saw also the EUA price hitting a three weeks peak at €5.14. Gains were also helped by short-covering as the 1.7mill/ton dropped in open interest pointed out. Friday saw EU carbon prices held above €5, closing at €5.03 near the bottom of their €5.01 – €5.12 range. German spot auction cleared 5 cents (biggest discount of the week) below the market at €5.02 and bid coverage was also low at 2.14 showing a lack of interest among buyers.

Week ahead

This is the third week with high auction volume levels that will continue until the end of the month. July is also known for being a quieter month in terms of utility hedging which send bearish signals to the market for this week. Then again sustained low hydro levels in South Europe, strong Euro levels against the dollar and healthy clean-dark spreads will balance out the market forces therefore making us take a neutral-bearish position this week.

Window of opportunity? The compliance deadline is out of the way for everyone for another year but the real carbon risk, MSR-induced price change, doesn’t go away so conveniently. The medium-term outlook for carbon prices is bleak but Energy Aspects’ longer term forecasts tell us that they are set to move substantially higher. To discuss your exposure and how we can help you get on top of it before the market reacts to the MSR’s start in January 2019, feel free to get in touch: info@redshawadvisors.com

Other News

Aviation inclusion in the EU-ETS gets clearer as deadline approaches

After the EU council of member states formerly agreed the terms from the European Commission proposal on aviation tabled in February which aimed to extend the stop-the-clock derogation until 2020 (at least) and to apply the linear reduction factor (LRF) of 2.2pc to aviation’s cap, and in the wake of the Parliament and council next round of talks and the Parliament’s environment committee vote on the 10th and 11th July respectively.

The EPP’s coordinator in the environment committee and German member of the European Parliament, Peter Liese, has stated that the proposal to increase the amount of permits airlines must buy under the EU’s emissions trading system (ETS) from 15pc to 50pc will gain a “huge majority” in the European Parliament. The additional free allocation taken from aviation could be used for industrial sectors exposed to international competition or risk of carbon leakage, said Liese.

EU member states and parliament must agree to amend EU ETS legislation before the end of this year to avoid the EU ETS full scope being restarted when the exemption for non-EEA flights expires on 31 December.

Nordic nations sum up to the carbon floor adepts.

The Nordic Council, an advisory body to the Nordic nations, has stated in its latest strategic review on energy cooperation that a carbon floor should be introduced if the EU ETS reforms fail to boost prices to stimulate low-carbon investment.

A call for imposing a carbon price has grown since EUA prices has cruised along at 5 Euros for several years now. The French President Emmanuel Macron is pushing to impose a carbon floor price across France, Germany and possibly Belgium and the Netherlands, now with increased support from the Nordic nations (Norway, Sweden, Denmark and Finland) surely the pressure on EU decision makers to deliver a more ambitious EU ETS legislation for the Phase IV feels stronger.

Carbon Forward is back and Redshaw Advisors announced as official partner

Redshaw Advisors are pleased to announce that we will once again be the official conference partner and training day provider for the annual Carbon Forward conference to be held in London on 26th-28th September 2017. The conference will give carbon market participants from all over the world a greater understanding of the risks and opportunities they face in ever-changing carbon trading, regulation and taxation.

Brexit, the ‘Trump factor’, an ambitious Phase IV reform package, the Chinese ETS launch in 2017 and the development of a global offsetting system for the aviation industry mean carbon risk is higher than ever. To successfully manage this risk companies need a thorough understanding of how carbon markets and regulation across the globe affect them and their competitors, Carbon Forward is designed to provide that understanding.

Interested in attending or finding out more? Fill in your details here and you will receive regular updates on the latest speaker announcements, program developments and special offers. More information can also be found at www.carbon-forward.com.

Alternatively, if there is something you would really like to see in the conference program please drop us an email with your suggestion(s) and we will let you know what we can do to make it happen.