Respect for your privacy is our priority

The cookie is a small information file stored in your browser each time you visit our web page.

Cookies are useful because they record the history of your activity on our web page. Thus, when you return to the page, it identifies you and configures its content based on your browsing habits, your identity and your preferences.

You may accept cookies or refuse, block or delete cookies, at your convenience. To do this, you can choose from one of the options available on this window or even and if necessary, by configuring your browser.

If you refuse cookies, we can not guarantee the proper functioning of the various features of our web page.

For more information, please read the COOKIES INFORMATION section on our web page.


News

EU ETS: Carbon price is rising again

20/05/2022 - François-Xavier Branthôme
At 88 Euros/tonne as of May 4th, the price of carbon allowance has increased by 30 Euros (+51%) since its lowest level on March 7, 2022
 
A recent report of ECB (European Central Bank) showed that he price of emissions allowances (EUA) traded on the EU’s Emissions Trading System (ETS) has increased from below Euros 10 per metric tonne of carbon to above Euros 90 since the beginning of 2018. In general, EUA prices are mainly driven by demand-side factors (such as economic activity and fuel switching) and public policies. Market commentary suggests that major factors behind the increase since early 2018 are likely to have been the introduction of increasingly stringent climate change policies in the EU and globally, alongside various changes in ETS market design. In April 2018 the introduction of the revised EU ETS Directive – which sets the framework for the fourth trading period, from 2021 to 2030 – appears to have enhanced the credibility of the scheme.
 
The announcement by the European Commission of the European Green Deal in late 2019 is also reported to have supported EUA prices, alongside the endorsement by the European Council of a new EU-wide emission reduction target in late 2020.
 
The largest share of the EUA price increase has occurred since early 2021 and likely reflects a multitude of factors. Research by the European Commission and commentaries by participants in the EUA market suggest that several factors have led to the acceleration of the price increase since early 2021. 
  First, particularly cold weather in Europe at the beginning of 2021 caused energy demand to rise. In the short term, given production rigidities, higher demand for energy translates directly into an increase in demand for EUA certificates and therefore into higher EUA prices.
  Second, the announcement of the European Commission’s “Fit for 55” package of legislative proposals reinforced the role of the EU ETS as the EU’s major decarbonisation tool.
  Third, phase 4 of the ETS, which started in 2021, also entails a shrinking supply of EUAs over time and updated parameters for the Market Stability Reserve, which will further limit the amount of EUAs available in the market.
  Fourth, the main factor behind the most recent price increases is higher gas prices, which encourage electricity producers to switch from gas to more CO2-intensive coal-fired power generation, thereby increasing the demand for carbon permits.

Role played by speculation
In light of the particularly strong increase in EUA prices over the last two years, the potential role played by speculation has also come into focus. Even if EUA prices are expected to increase to meet increasingly stringent decarbonisation goals, sharp price increases over a short period could imply that firms are faced with quickly rising costs without having sufficient time to adjust production capabilities. In this respect, European Commission research suggests that the price rally may have been supported by increased interest from non-compliance entities, such as investment funds, in the ETS. Market intelligence also suggests that exchange-traded funds and other investment funds may be playing an increasingly important role in the ETS market.
However, the bulk of empirical studies of the drivers of carbon prices have so far focused mainly on structural determinants of price fluctuations and given limited attention to changes in speculation and, at present, tangible evidence of a strong increase in speculative activity related to potential changes in market structure appears scarce. Finally, according to the report published by the European Central Bank (in its ECB Economic Bulletin, Issue 3/2022), a speculation index confirms that, while speculation appears to have increased slightly since early 2019, it seems to remain limited and well below the levels seen during earlier phases of the ETS.
 
Sources: ecb.europa.eu
Related articles

EU carbon permit prices crash after Russian invasion of Ukraine

03/03/2022 See details

Europe\'s carbon price nears the 100 euro milestone

07/02/2022 See details

Benchmark EU carbon price hits record high above 80 euros/tonne

06/12/2021 See details

Benchmark EU carbon price breaches 70 EUR/tonne for first time

25/11/2021 See details

Carbon price rises above Euro 60 to set new record

10/09/2021 See details

Carbon soars past EUR 58/t to fresh record high

02/07/2021 See details
Back

________________________________________

Editor : TOMATO NEWS SAS -  MAISON DE L'AGRICULTURE - TSA 48449 - 84912 AVIGNON Cedex 9 - FRANCE
contact@tomatonews.com
www.tomatonews.com

 

 

Supporting partners
Featured company
IFT S.r.l.
Most popular news
Featured event
2022 Tomato News Conference
Our supporting partners