19 Mar 2019

EU ETS - Will high carbon prices last?

The price of EU Allowance credits (EUAs) increased rapidly in 2018. A lot of credits were put in the bank, but not only because they were needed by emitters. The main reasons for the rise were anticipation of the Market Stability Reserve (MSR), front running hedging by emitters, limited fuel switching and the entry into the market by financial investors.

So what is the forward curve likely to look like? Thomson Reuters Financial & Risk business, Refinitiv, has released a webinar forecasting the EU ETS curve to 2030.

Spoiler alert: the price remains reasonable to drive coal switching while not killing the economy.

Source: https://www.refinitiv.com/perspectives/wp-content/uploads/2018/12/03-Will-high-European-carbon-prices-last-11-12-2018.jpg

Here's a really good webinar which provides an insight into some of the practicalities facing emitters and an understanding of what drives the carbon price: https://www.refinitiv.com/perspectives/market-insights/will-high-european-carbon-prices-last/

Peter-Giles Robinson, Projects Manager

Disclaimer: This is a non-technical brief on the EU Carbon market. My opinions and assumptions do not necessarily represent those of the company, nor do they make warranties or commitments on behalf of the company. Please feel free to contact me via [email protected] for any further information.