FC Market Report CW12 120321

8/2/2019 FC Market Report CW12 120321

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Page 1 of 3 | 12-03-21

Source: Bloomberg, ECX - Last update: 12-03-21

Daily EUA Price IndexDaily EUA Price IndexDaily EUA Price IndexDaily EUA Price Index

6 €

8 €

10 €

12 €

14 €

16 €

S e p -

1 1

O c t -

1 1

N o v -

1 1

D e c -

1 1

J a n -

1 2

F e b -

1 2

M a r - 1

2

Dec12 Dec13 Dec14

On Tuesday of last week, the EUA market got underway with De-cember EUA contracts testing support at EUR 7.66. The supportlevel held and the closing price at the end of the day came in atEUR 7.80.Wednesday brought with it significant gains for emissions rights.Supported by rising stock market prices and in a technical reactionto the recent losses, Dec12 EUAs rose more than 4% and reachedEUR 8.13 by the end of trade.The markets started off trading sideways Thursday before the EUParliament finally made a clear statement on the emissions tradingmarket and called on the Commission to come to grips with weakspots (easier said than done. . .).The ongoing decline in emissions right prices is a real thorn in Par-liament’s side and also gets in the way of companies making emis-sions reductions. As a result, the debate on so-called “set-asides”has again taken the spotlight, but this discussion alone is notenough to support prices. Dec12 EUAs fell 1.5% to EUR 8.01 atclosing. At least they held firm at the EUR 8 level.Friday’s trading was characterized by a complete lack of funda-mentals to provide direction. There was nothing new in terms ofthe news flow to act as a price driver. Although there was a smat-tering of critical opinions on the discussed set-aside, but this time itcame from the chemicals company lobby, which has little sustain-able influence on the market and trading closed 3% lower amidstthin volumes.The new week likewise got underway with thin volumes. On Mon-day, prices did mange to advance a little to allow Dec12 EUAs toslowly approach the EUR 8 level. In the afternoon however, themarket turned and tested support at EUR 7.66. This was againrather a technical reaction, which ended with Dec12 EUAs closingat EUR 7.78. On Tuesday Dec12 EUAS opened at EUR 7.83 but itwasn’t long before markets started heading lower and support atEUR 7.66 collapsed. Finally, Dec12 EUAs closed at EUR 7.18,down EUR 0.60 from Monday’s settlement. Dec12 CERs kept uprelatively well and only lost EUR 0.14 in the course of the day.Today, allowance prices remained at low levels. At the time of writ-ing, Dec12 EUAs traded at EUR 7.20. CERs followed along, whichkept the spread at around EUR 3.50 for CERs.

Trading gets technical without fundamental drivers

Highlights of the Week:

• Dec12 EUAs drop below supportlevel of EUR 7.66

• Set-aside discussion continues topreoccupy the market

• Dec12 EUA/CER spread at EUR3.50

marketreport Wednesday, March 21, 2012Wednesday, March 21, 2012Wednesday, March 21, 2012Wednesday, March 21, 2012



Page 2 of 3 | 12-03-21

European Parliament supports the Commission’sstanceAfter the “Low Carbon Roadmap 2050”, which wouldhave redefined the EU’s long-term climate goals, failedin the Council thanks to Poland’s veto, the EU Parlia-ment has for the most part supported the Commission’splans. At the beginning of April, representatives of theCouncil, the Commission and the Parliament will meetto agree upon the next steps.The main starting point for the non-binding resolution isthe existing goal of reducing CO2 emissions by 80% to95% by 2050. With this in mind, the Parliament has

agreed to the Commission’s interim goal of a 40% re-duction in emissions by 2030 and a 60% reduction by2040. The proposal of more ambitious goals for 2020instead of just 20% reduction was also included in theresolution.Along with the “major” long-term goals, the resolutionalso includes short-term EUA volumes reductions (set-aside). The wording for this matter is in agreement withthe text the Industry Committee of the EU Parliamentpassed a few weeks ago. It refers to resorting to appro-priate measures that could also include withholding acertain amount of allowances. Because Poland hassaid in Council that it would view such plans critically,the news – which was positive in itself – hardly influ-enced market prices.

Emissions trading and interest gainsWhile emissions trading is mainly associated with addi-tional costs and expenses, the current market situationoffers some companies the opportunity for additionalearnings from interest. The prerequisite, however, isshowing sufficient liquidity. Should companies be ableto show this, there is currently a lucrative investmentopportunity on the market for emissions rights.The reason for this is the significant contango, which isthe term for when the current market price (or theshorter forward rate) for a product (EUAs in this case)is lower than the longer running forward rate. This oc-curs when there is a normal interest structure, as thecontango generally reflects the price for the cost ofcarry.In the current case, the contango between Dec12 andDec13 EUA contracts has widened to more than 6%above the Euribor rate. This means that a companythat buys Dec12 contracts and then sells Dec13 con-tracts can achieve an interest yield of around 7.5% – arate that is miles ahead of the current interest rate forone year.

European Parliament supports the Commission’s stance

Registered ProjectsRegistered ProjectsRegistered ProjectsRegistered Projects

0

100

200

300

400

500

600

700

J a n - 0

6

A u g - 0

6

M a r - 0

7

O c

t - 0 7

M a y - 0

8

D e c - 0

8

J u l - 0 9

F e

b - 1

0

S e p - 1

0

A p r - 1

1

N o v - 1

10

600

1200

1800

2400

3000

3600

4200

average MM CERs p.a. registered projects

Daily CER Price IndexDaily CER Price IndexDaily CER Price IndexDaily CER Price Index

3 €

4 €

5 €

6 €

7 €

8 €

9 €

10 €

11 €

S e p - 1

1

O c

t - 1 1

N o v - 1

1

D e c - 1

1

J a n - 1

2

F e

b - 1

2

M a r - 1

2

Dec.12 Dec.13 Dec.14

Source: UNFCCC - Last update: 12-03-21

CER-IssuanceCER-IssuanceCER-IssuanceCER-Issuance

0100200300400500600700800900

10001100

A p

r - 0 6

O c

t - 0 6

A p

r - 0 7

O c

t - 0 7

A p

r - 0 8

O c

t - 0 8

A p

r - 0 9

O c

t - 0 9

A p

r - 1 0

O c

t - 1 0

A p

r - 1 1

O c

t - 1 1

0400800120016002000240028003200360040004400

Issued MM CERs Issuances

Source: UNFCCC - Last update: 12-03-21

Source: Bloomberg, ECX - Last update: 12-03-21



Page 3 of 3 | 12-03-21

DisclaimerDisclaimerDisclaimerDisclaimerService provider:Service provider:Service provider:Service provider: First Climate Markets AG, Industriestr. 10, 61118, Bad Vilbel, Germany, HRB 77265,EditorEditorEditorEditor----inininin----chief:chief:chief:chief: Stefan KleebergThe information contained in this market report has been carefully researched and compiled to the best of our knowledge.However, First Climate Markets AG cannot accept responsibility for any consequences, especially financial losses, whichmight be caused by the use or reliance upon this market report or any information contained therein, in whole or in part.The information contained in the report does not constitute investment advice and you should not rely on any material inthe report to make or take (or refrain from taking) any action. First Climate Markets AG does not assume any liability forthe accuracy, completeness, or usefulness of the content, whether express or implied, of the market report. The statementsand conclusions contained in the market report represent the opinions of First Climate Markets AG and are subject tochange at any time. First Climate Markets AG is not obliged to publish any changes in opinion.

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FC Market Report CW12 120321

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