December 10, 2013#

Point Carbon: EU ETS gets a confidence boost as backloading approved

UP IN SMOKE 5 fotograf Bo Tengberg

The following is a new article printed for Thomson Reuters Point Carbon regarding the backloading of 900 mio carbon credits.

Point Carbon estimates that the price of a credit is likely to be €6 next year.

Compared to what was expected to be around €35 when the EU ETS was introduced in 2005, it’s still a bargain for the polluters.

From Thomson Reuters Point Carbon:

Oslo (10 December 2013)

Today, the European Parliament cleared the final hurdle of backloading 900 million allowances from the European Emissions Trading Scheme (EU ETS) by adopting the legally-clarifying amendment to the ETS Directive by a large majority, according to Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

“Today’s vote finally confirms that  900 million allowances will be backloaded from the EU’s Emissions Trading Scheme (EU ETS) as of next year, said Hæge Fjellheim, Senior Policy Analyst, Thomson Reuters Point Carbon. “This outcome was largely expected as the Parliament has merely confirmed its position from July but it takes away the last spark of uncertainty” she added.

According to Marcus Ferdinand, Senior Market Analyst with Thomson Reuters Point Carbon, “The positive outcome of the Parliament’s vote removes a large portion of risk and could lead to an increase in EU Allowances (EUAs) prices as it ends a lengthy and cumbersome policy process that has kept the market busy for the past two years. However, prices have been rising in recent days and we could see a short-term ‘buy the rumour sell the fact’ reaction where traders take profit on the anticipated outcome”.

As a mere formality, the Council will have to adopt the legal clarification to backload allowances which will most likely happen on 16 December. Furthermore, on Wednesday, 11 December, the Climate Change Committee, which consists of member state experts, should then discuss how backloading will actually be implemented. Three options have been proposed by the European Commission. Wednesday’s meeting will most likely provide an indication as to which option member state representatives favour and this could have an impact on carbon prices this week.  According to Fjellheim, “the detailed implementation of backloading will need some more time, as the process involves a formal proposal by the Commission, a vote in the Climate Change Committee as well as a scrutiny period by Parliament and Council which will most likely start in January, with a final adoption expected around May 2014.”

Ferdinand concluded: “We expect some upside to EUA prices in the coming months as the implementation of the measure becomes more concrete. Assuming the first allowances will be withheld from the market in the second half of 2014, we forecast the 2014 carbon price will increase by 35% compared to this years’ price, to an average of €6/tonne”.



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