Carbon 2009 Emission trading coming home - UNEP Finance Initiative

Carbon 2009
The EUA bull run started at the
end of February, as a firming
energy complex sent EUAs
soaring. The January climate
and energy proposal by the
Commission compounded the
bullish mood.
Falling EUA price
in second half of
2008
The long ascendancy was
reversed in July, near the alltime
high for the contract, amid
concerns over the US economy
and a bursting of the crude oil
price bubble. This fed bearish
sentiment into the rest of the
energy complex, with NBP gas,
API-2 coal and German power
prices all recording significant
losses. A wave of selling from
industries, which expected lower
production and hence lower
emissions, put further pressure
on EUAs in the second part of
the year.
Starting from October, EUAs
were driven further downwards
by a worsening global economic
outlook, with data showing the
eurozone officially in a recession,
and continuing bearish energy
complex. The Brent front month
contract fell steadily from
July, dropping to $40/bbl on
5 December. The EUA fell to
€13.52/t on 5 December, which
was the lowest close since
February 2007, and traded in the
€14-15 range before its expiry.
Over the year, 2,710m EUAs
changed hands in the brokered
OTC market and on the
exchanges, with October being
the month with the highest
trading volume (355 Mt), (see
Figure 2.5). This compares to a
total volume of 1,443 Mt in 2007,
or an increase of 88 percent. Of
the 2008 figure, 57 percent went
OTC while 43 percent traded on
the exchanges. The share trading
on exchanges has increased from
30 percent last year. 300 Mt were
traded bilaterally, which brings,
together with auctioning and
options the total volume in EU
ETS to 3,091 Mt.
EUA-sCER spread
hit all-time high of
€9.05 on 22 April
During the first months of 2008,
the EUA-sCER spread was
trading between €4/t and €6/t.
From March, it started to widen,
reaching an all-time high of €9.05
on 22 April. This bullish trend also
coincided with the sustained
appreciation of EUAs seen in the
first half of this year. Secondary
CERs declined as EUAs came off
their peak in July. However, they
Figure 2.5: Monthly EUA trade volume, 2008
Volumes in the brokered OTC market and on the exchanges.
400
360
320
Exchanges
OTC
Million EUAs traded
280
240
200
160
120
65
59
50
65
48
83
119
89
120
167
161
144
80
40
116
109
99
138
102
157
175
93
157
188
132
76
0
Jan -
08
Feb -
08
Mar -
08
Apr -
08
May -
08
Jun -
08
Jul -
08
Aug -
08
Sep -
08
Oct -
08
Nov -
08
Dec -
08
Source: Point Carbon's Carbon Market Trader
6
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