Carbon Markets Weekly January 12-16

European carbon market showed some bullish trends last week amid a bearish pressure of the wider energy complex. EUA Dec-15 contract started the week by falling to the €6.68/t support level and it recovered on Tuesday (Jan. 13) soaring by nearly nine percent. After corrections due to profit taking in Wednesday’s and Thursday’s sessions, it closed on Friday at €7.35/t, up  €0.42/t (6.06 percent) week-on-week. In the UN-backed CDM market, the CER contract for December 2015 closed almost flat at €0.46/t, gaining €0.01/t (+2.22%) from the previous Friday’s finish.

Reuters Point Carbon indicated optimism concerning the MSR proposal as the main reason behind the upside posted by the EUA Dec-15 contract on Tuesday, as a text showing a potential compromise evolving amongst member states in the EU Council circulated among participants and pushed the price up. Analysts suggest that the main price driver for EUAs in the next weeks will be the MSR debate in the EU Parliament. The EU Parliament ENVI committee will discuss amendments to the MSR file on Wednesday (Jan. 21) while the Industry and Energy Committee (ITRE) will vote on it on Thursday (Jan. 22). Both events are open to the public via webstream.

Although ITRE vote will merely give its opinion which will be put up for a vote in the lead ENVI committee on 24 February, it will be the first important indication as to what the Parliament’s final position on the MSR will be. According to analysts by Reuters Point Carbon, the behind-the-scenes preparations are intense ahead of the vote and the ITRE committee seems split in two major camps of nearly equal size: the EPP and EFD groups seem in favour of an early start date of 2019 and propose to postpone a decision on how to handle the return of the backloaded allowances to the wider process of an EU ETS review, while S&D, ALDE, Greens and GUE support a start in 2017 coupled with a cancellation of the backloaded allowances and a steeper reduction of the oversupply.

Any support for a strengthening of the EU Commission proposal through an earlier start date could provide a bullish signal for prices, Reuters Point Carbon says. MSR discussions will also continue in the EU Council, with a meeting focusing solely on the MSR taking place between member state officials on Friday (Jan. 23)

 

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