CO2 seems stronger than the Euro; floor appears around Euro 15 [May 2]

CO2 price, falls and recovers to pre-Copenhagen levels [Jan 4]

The CO2 price has been corrected for the Climate Summit and Obama hype and is back to normal within the margins that fit with the market fundamentals. The correction was a bit to steep, shortly after the Summit, which is now again corrected due to strong winter cold.

CO2 traders nervous for Copenhagen [16 Nov]

CO2 finds Summer price ceiling: waiting for new signals [15 July]

CO2 Fundamentals unchanged; price is floating on the wind [March 15, 2009]

Though fundamentals of the carbon market are yet unchanged, awaiting 2008 verification numbers in May, the CO2 price seems to float to wherever the wind blows. Now with the increasing oil price, than with the German power price.
Interesting is the growing interest in globally linked Emissions Trading systems; that is to say indirectly linked through the CDM. And though CDM is more and more seen as flawed and loaded with loop holes, it is seen as a transition to a globally linked carbon market. That means that CDM will keep pace with the EU ETS, as we see now.

Recovery seen for second half of 2009, but no floor for CO2 price yet [Dec 1]

Continued economic backlash brings the CO2 price down to mid 2007 levels, Euro 12 and for sCER 11 Though for the longer term a price recovery is expected, we haven't seen the 2008 price floor yet! That could come lower than Euro 15 next month, that was noted by IdeaCarbon as a floor. The minimum regarded price for CDM-sCER is seen as the buffer to keep EUAs up. Nevertheless some see a floor at 5-10, other even expect 0. ABN-AMRO pointed at the fact that since banking of suplus EUAS is allowed to after 2012, the prive will not come to a single digit number.
For 2009 analists are optimistic, as power companies start to build up their compliance position for that year. Société Generale expects a price of 21-26 Euro. Pointcarbon 22 Euro.

Impact of the financial crisis on the CO2 Market [Nov 2]
As we can see, also the CO2 price dropped during the market crashes on Sept 11/13 and 28/30 to € 22,50 per ton of CO2. Because when the value of  financial and energy commodities decrease, so does the CO2 price. Remarkably though, the CO2 price drop is relatively small and recovered swiftly again up to € 24.
Analists agree that the CO2-markt is more and more delinked from the oil and gas price. Hence, the CO2 price depend on demand and supply on the CO2 market itself. And, especially in this crisis we see that the CO2 market become less a bank driven market but more a compliance driven market [comply with CO2 caps].
When the finacial crisis turns into an economic crises I expect a larger CO2 price drop. lower economic growth means also lower CO2 emissions en therefor less demand.

EU Parliament opens door for forestry cedits to CO2 market [Oct 7]

The European Parliament voted for an amendment to open the door for forestry credits, including Reductions of Emissions through Deforestation and Degradation (REDD) to the EU CO2 Market. This could happen as part of forestry projects in developing countries, under a new treaty (Copenhagen, 2009) of under a bilateral agreement, when there is no treaty. It contains of course conditions for sustainability etc. and the EU Commission wants to set criteria the projects would need to meet.
It sets the cap at max 5% of emission reductions needed by installations under ETS. That is of course a vague factor now, when we do not not know what post 2012 targets will be. Also, it is expected that when the EU goes after 2012 for 30% or more this number can increase.
Though a limit of 5% may mean a total of 40 Mton for 2013-2020, REDD can be banked for after 2020 of course.

The 5% includes also afforestation and reforestation credits, but because the amendment talks about permanence and these credits are temporary by regulation (tCERs/lCERs), the socalled REDD credits can easily compete with them.
The EU Parliament will now negotiate the amendments with the EU Council of Ministers and adopt them a plenary session in December the Amendments. The Council seems cautious on forestry credits but the Parliament seems persistent it should be part of the options

Short term volatility; long term more certainty [Aug 27]

Traders note a very volatile CO2 price trend and don't know what to expect tomorrow; neither do we.... These days very active traders may loose some ground indeed. Nevertheless, traders that need to ensure long term compliance for their clients can feel more relaxed. The overall perspective for 2020 didn't change much. For news on tighter CER supply we had news on greater shortage when aviation links up. Moreover, this shortage combined with the strategy of banking extra allowances when prices fall, wil make long term prices remain between € 35 and € 40. So, todays contract for 2014, noted at the ECX for Euro 32 looks interesting!

Contango for CO2 contracts [July 2]

The spread between the 2008 and 2012 emissions allowance contract shows that they are more and more in contango; this is another proof of trust in the carbon market. Traders are willing to factor inthe future 'cost of carry'. Economic models often use a 5% cost increase, which is almost the spread between the CO2 contracts now.

Fuels drive CO2 at speculative levels [april 16, 2008]

After a Month of cosy waving carbon prices, up and down within a margin between € 20 and € 22, April brings clearly appetite to the carbon market. Today's 2008 contract reached the € 25 per ton of CO2, where € 24 was even a challenging level to test for a year. True, oils ad gas are up, coal is down again; so we will probably see some extra shortage for a while. But that will be followed by an early Summer fuel switch from coal to gas for power, given the high carbon price. This will make up for the temporary extra shortage.

Hence, you are used to this analysts' saying that supply and demand are the key carbon price drivers and that the threat of an overheating carbon market is always nearby.
That is why we will probably see today high volumes again, and lowering prices, because of profit takers, selling against this attractive price.

CO2-price correction, along with global markets decrease; CO2 price still around € 20 [17/3]

All along with the gobal tendancy, beginning of January,of decreasing stocks and commodities prices the CO2 price witnessed a correction of about 10% from € 23 to € 20. A price correction on the CO2 market is in itself healthy, because overheating was foreseen. On the global market the weak position of the finance sector is a dominant factor. That doesn't need to impact the CO2 market per se, because the CO2 market is depending on shortage and supply and demand of CO2 allowances. The mean link with the global market is the decreasing oil price - again below $ 100 -, enabling power generators, with a commensurate lower gas price, to switch more to gas, and to save allowances.
And indeed, we see a bulish CO2 market, since the announcement Jan 23, of the European Commission to strengthen the EU CO2 commitment to 20-30% in 2020 compared to 1990, analysts expect an overall shortage of about 400 Mton. And depending on the availability of CDM/JI credits and the acceptance policy of the EU, the projected third phase carbon price varies between € 27 and € 47 per ton CO2.

Entering the ETS second phase: € 22-23 [07/01/2008]

The market will leave the ETS pilot phase '05-'07 on Dec 31 with ambivalent feelings. Glad, that the real market will have to prove it is right; and the 2008 price is firm at € 22-23 per ton. Sad, because the learning phase showed us mistakes and flaws in the carbon market. And not all of them have been solved to date.

But even in a thin illiquid market of today, the price remains at € 22-23; it has been at that level for some time, and the projections for the second and third phase still show a reasonable shortage growing from 200 Mt/a to maybe 400 Mt/a, with a futures price margin of € 25-35 for 2020. Not high enough for most CO2 storage projects, but low enough to keep climate cost down and to create some incentives for companies to keep emissions low and to benefit from carbon sales.

Moreover, only limited price levels will bring the US on board to a global market. The Warner-Lieberman Bill prepares the US economy for such global link-up. Secundary CERs prices of around € 17 still lag the ETS price with around € 5; but there is no reason why we would not see a smaller spread between EUAs and CERs and have only one global carbon price, within a few months.

CO2 Market Expectations grow; EU Commission cuts Allocation Plans with 10% [11/21]
[latest update: 05.26.10]

For the first time since 4 Months the CO2 price for 2008 EUA futures is at the € 23 level. Speculators and funds are waking up again. After some profit selling last 2 weeks and a small price drop, the CO2 price remains at that level. The daily transaction volume has been now and than between 5 and 7 Mton again. The high oil price itself ($ 100/barrel) seems to have less impact on the CO2 Price, as it did in 2005 and 2006 when CO2 prices were peaking at € 30. Of course did the bullish energy market play some role in the current increase of gas and coal price. German utitilies already announced upcoming power price increases. Main trigger for this price level is the expected long term shortage of EUAs, instigated by the 27 European Commissions' Allocation Plan decisions [see press release], causing a 9,4 % cut compared to proposed NAP-2 and a 10% cut compared to NAP-1.

The CO2 Market becomes more and more aware and assured that as of 2008 the market will show a shortage of more than 100 Mton a year. Reason for that is the recent European Comissions' decision on the Bulgaria, Rumanian and Portuguse Second Allocation Plan (NAP-2). The complete set of 27 NAP-2 decisions end up to a total annual allocation of 2,08 billion ton EUAs, with a value of about € billion 50 (see EU press release). This means a cut of 10% compared to the proposed NAPs. And, considering the economic growth since then and the accession of hundreds of new installations to the ETS ( about 54.6 Mton) this ensures a sharp shortage of EUAs. “We have assured a robust market with real emission reductions which will constitute an important contribution to meeting our Kyoto target,” Environment Commissioner Stavros Dimas said in a statement. The shortage may even increase as of 2010 with 150 Mton a year when the aviation sectors gets linked-up with the ETS. Brussels is still discussing plans for that.

Seven member states have filed lawsuits against the Commission for the decisions on their allocation plans. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. The European Court of Justice will decide 2009 te earliest. I don't expect this will change the outcome much. Hence the ETS Directive prevents the companies to receive more EUAs than needed, but to allocate them less then needed is allowed.

De ‘EUA-CER spread’, is increasing again a bit to about € 5. Euro 5 per ton. The CER price itself is incrasing too but the apparently the market seems to find that € 17 is enough for a sCER. Or all power companies have already assured their maximum quota of allowed CERs to cover their emissions or banks are waiting for larger spread betwen CERs and EUAs before they purchase more CERs. For the NL the CDM/JI quota is 10% for examle For other member states this is between 7 and 20%.