Carbon Markets Weekly 16-20 February

European carbon market reversed its upward trend amid profit-taking and weak signals from the MSR debate in Brussels. Reuters Point Carbon analysis pointed out that political groups in the EU Parliament did not agree on past week’s compromise proposed by Ivo Belet, rapporteur of the MSR file, with the start date of the mechanism remaining as a sticking point. Apart from the EPP group, no other political groups have signalled support for such compromise. The main sticking point is the start date. The S&D wants the MSR to be operational at the latest by 1 January 2018. The ALDE and ECR groups are undecided on whether they would be willing to align with the Belet proposal, while the Greens have clearly indicated their intention to stick with a 2017 start date (combined with a cancellation of the backloaded allowances).

The main price driver for EUAs remains the MSR vote in the ENVI committee on Feb. 24. Analysts expect a broad compromise to be formed ahead of the ENVI vote as it would minimise the risk that the EU Parliament in plenary is involved ahead of the trilogue process. If ENVI fails to agree on a broad majority view, the vote on the Parliament negotiation mandate for the trilogue with the Council will be forwarded to the Plenary, postponing a decision to either the March or April session.

The EUAs Dec-15 contract closed on Friday at €7.49/t, losing €0.35/t (-4.46 percent) week-on-week.

In the UN-backed CDM market, the CER contract for December 2015 closed at €0.39/t, down €0.05/t (-11.36 percent) compared to the previous Friday’s finish.

 

(Market analysis and data by Thompson Reuters PointCarbon, our data visualization using Tableau Public)