CO₂ Market intelligence

Orbeo research team provides you:

• - regular (e.g. monthly) information, briefs and analyses on CER market and its evolution;
• - instant direct access to analysts at any time and update on price forecasts.

Weekly CO₂ market analysis

SG orbeo Carbon Drivers - December 12th, 2011

Back to €8 /t this week

• - Carbon prices remained almost stable last week. Dec11 EUA tested a new record low €6.77 /t on Tuesday, then rebounded from Wednesday and touched €8 /t on Friday. On the whole, Dec11 EUA slightly increased by €0.05 /t while Dec11 CER drop by €0.05 /t, closing on Friday at €7.84 /t and €5.3 /t respectively

• - Market talk is that the EIB could have started selling Phase III volumes last Tuesday, which would explain the strong decrease observed at the beginning of the week. For us, the price evolution was mainly due to the consolidation of European energy prices, gas in particular. On Thursday and Friday, NBP rebounded strongly (first-nearby £2.2 /th higher). This was positive for carbon

• - Our outlook is now rather neutral this week for carbon. Fundamentals remain quite unsupportive, but momentum is turning more positive. Gas prices could also support carbon and help prices trade around €8 /t

SG orbeo Carbon Specials - December 12th, 2011

The Durban Package: a quick assessment and implications for carbon markets

• - On Sunday 11 December the representatives of more than 190 nations decided a “Durban Package”. The Package states that an agreement with “legal force” and involving all countries has to be adopted latest by 2015, for implementation in 2020. The Kyoto Protocol is extended by 5 years (to 2017), allowing the continuity of existing markets and instruments. The set of measures to support developing nations agreed last year in Cancun is implemented, featuring in particular the Green Climate Fund ($100 bn per year from 2020, ramping up until then)

• - The Durban Package contains one very significant element, which could be named a breakthrough: the acceptance by emerging and developing countries of the principle to limit their emissions from 2020. The continuation of the Kyoto Protocol (in particular, the Clean Development Mechanism is confirmed and extended to CCS projects) also removes a key uncertainty for investors. Considering the very low initial expectations and the present context of economic and financial crisis, the Durban outcome can be considered as unexpectedly positive as a total breakdown was not to be excluded. The consequences of Durban for the future negotiation process should be major as they remove some key stumbling blocks experienced up to now

• - On the negative side, one could point out that there is no clear legal status of the 2015 agreement (the text should have “legal force” but the “binding” notion has disappeared); that no additional climate action will take place before 2020, and that even 2020 action is not guaranteed; that as a result the gap between climate scientists’ recommendations and emission reduction pledges continues to widen as action is slow, and delayed. The Durban Summit mainly allowed the negotiations to continue

• - While allowance prices could be temporarily helped by the positive sentiment born in Durban, the Package decisions do not change the supply-demand in the EU ETS. Only if the European Commission manages to use the Package to enforce further tightening of the supply side (by a renewed push on the “set-aside” mechanism or change of the 2008 Directive targets to -25% or -30%) would Durban lead to medium-term impact. Since this is still uncertain and distant, we think a durable positive evolution of European carbon prices will rather hang on the successful continuation of the Eurozone debt crisis resolution, able to restore confidence on the EU economic prospects

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