Carbon Markets Weekly 13-19 October

The week started off on a bearish tone in the European carbon market before a strong EU auction result on Tuesday (Oct. 14) opened room for more bullishness. Statements made by UK’s Energy and Climate Minister Ed Davey calling for an early implementation of the market stability reserve pushed the market through the €6.13/t resistance level, and remarks from Germany’s chancellor Merkel calling for an early reform of the EU ETS on Thursday further improved sentiment, lending additional support. Market participants priced in positive statements on the market stability reserve as well as on the 2030 energy and climate package negotiations starting on Thursday Oct. 23 at the EU Council,  receiving opposition led by Poland as negotiation tactics not necessarily jeopardizing the overall adoption of the targets. As uncertainty regarding the possibility for member states to find a conclusion with regards to the 2030 package limited the upside, the EUA Dec-14 contract closed on Friday at €6.13/t, up €0.09/t (+1.49 percent) respect to the previous Friday’s finish.

According to analysis by Reuters Point Carbon, the uncertainty over the 2030 package could permeate the market until the very last moment of negotiations, and the direction of the EUA Dec-14 contract this week will very much depend on statements by policy-makers ahead of the summit. If an agreement is in sight throughout the week, we could see prices testing the €6.27/t resistance level again. If Poland keeps its opposition unchanged until the very last moment, we could see prices hovering around the €6/t level for most of the week to trade up after an agreement is reached.

In the UN-backed CDM market, the front-year CERs continued its downward trend and closed on Friday at €0.07/t, losing over 22 percent (2 cents) week-on-week.

 

(Market analysis and data by Thompson Reuters PointCarbon)