W1: Carbon Market Price Index

W1: EU ETS

EUA slump on mild weather, dipping energy prices

Since the last weekly report before the holiday (23 Dec), the benchmark Dec-23 contract has fallen by EUR 10.54/t, a drop of approximately 11.8%. Prior to the dip, prices had been supported by a cold snap that buoyed the energy complex. As the colder than expected weather subsided and milder temperatures returned, prices fell. These conditions persisted throughout the past week (beginning 30 Dec). Low volume trading during Monday’s session (2 Jan) saw a EUR 2.31/t increase in the Dec-23 contract, though this was not indicative of a trend due to the bank holiday for UK traders. Following an uncertain market on Wednesday (3 Jan), carbon fell precipitously to reach a low of EUR 77.15/t before retreating to EUR 77.78/t, a drop of close to 7%. Thursday’s session (4 Jan) settled upwards on a technical correction to EUR 78.83/t. Thursday’s close marks the end of a bearish week during which prices slid -6.48% week-on-week.

Carbon has mirrored the broader energy market, with a lack of policy events lending weight to weather and energy prices as drivers. Gas, coal, and power have all reacted to updated forecasts showing milder weather and higher wind, limiting demand. Additionally, supply has remained strong as storage for natural gas has remained above 83% of capacity and port coal stocks remain high. Energy prices reached a nadir this week on Wednesday (4 Jan) as Cal-24 API2 coal dipped to USD 167.98/t and the Dutch TTF Feb-23 contract fell to EUR 65.022/MWh. Coal, gas, and power prices rebounded slightly during Thursday’s session, reaching USD 168.27/t, EUR 72.422/MWh, and EUR 196.50/MWh respectively.

With fundamentals pulling downwards, auctions returning, and a weak macroeconomic outlook, supportive drivers for EUAs are limited.

Weather forecasts continue to predict milder temperatures and higher wind than seasonal norms. Low heating demand and solid renewable generation suggests lower emission intensive power generation, thus lower EUA demand. The mild weather situation is expected to continue until mid-February. High storage levels for gas and coal and lower demand due to the mild winter is weighing on the energy complex and sends bearish signals to carbon. After an EUA auction pause since 19 December, governmental auctions will return on Monday (9 Jan) with a total 9.2 Mt EUAs offered. While this is expected, the return of auctions following the holiday pause will be closely watched by market participants and fresh supply coming to the market could weigh on carbon. 

From a technical perspective, the outlook is neutral to bearish. After the EUA Dec-23 contract paused the downward move from end-December in the first days in January, Wednesday’s session posted a large bearish candle breaking below 100- and 200-days moving averages resuming the bearishness. After a dip slightly below the €78.14/t level we could see this level could step in to keep prices from falling further next week. There is downside potential reaching to 21 November’s low of EUR 74. 82/t. Rangebound trading can be expected for the next week between EUR 80.67/t and EUR 74.84/t.

On the policy front, following the flurry of activity that concluded in the agreement on EU ETS revision, there has been a lull. Next week, activity will begin to pick up again with a 9 January meeting of the Working Party on the environment and a 12 January meeting of the European Parliament’s ENVI committee. The political agreement from the ‘jumbo trilogue’ will need to be approved in both the Council and the European Parliament before adoption, however, barring any unexpected opposition, neither of these events is likely to have a market impact. As a driver, policy will continue to take a back seat through next week.

For more information related to the EU ETS please contact 

W1: RGGI

Extreme weather activity impacts market activity for RGGI

From 24 December the data in the graph above transitions from the RGGI V22 Future Dec-22 contract market settlement price and volume traded to that of the RGGI V23 Future Dec-23 contract. The RGGI V23 Future Dec-23 contract closed at USD 13.50/st on Thursday (05 January). This is a 5.2% week-on-week decrease from last Thursday’s (29 December) settlement price of USD 14.24/st. The contract reached a high of USD 14.25/st on 30 December and has since made a USD 0.74 decrease to the USD 13.50/st closing price this Thursday. Such a drop in the contract settlement price after the beginning of the year is reflective of companies beginning to settle in their long positions after heightened activity for the RGGI V23 Future Dec-23 contract seen in December.

In conjunction with increased end-of-year market activity, the USD 13.90/st – USD 14.25/st price range seen in the RGGI V23 Future Dec-23 contract from 19 – 30 December (prior to the subsequent drop in price in January) are a result of the major winter storm that affected large parts of the United States, including several RGGI member states – such as New York, Vermont, New Hampshire, and Maine. The subzero temperatures, coupled with heavy snow, put a large demand on the power sector and, therefore, on carbon allowances.

The retracement seen in the RGGI V23 Future Dec-23 contract price from 03 January stems, in large, from end-of-year profit maximization by market entities followed by decreased market activity following the holiday season. The steep drop in the contract’s price seen from the beginning of the month, moreover, is attributed to the subsequent warmer weather that followed the winter storm. Temperatures in Boston, Massachusetts reached highs of 63 

F (13 °C) higher than the average temperature for that time of year. Furthermore, weak macroeconomic conditions such as high interest rates and inflation have also played a role in the downward price trend this past week.

Minimal market engagement may have also been a response to North Carolina’s delay in its course to try to become a member of RGGI. The Environmental Management Commission (EMC) was set to meet in the middle of next week to continue the process, but delayed discussions as a fiscal analysis on membership has not yet finished. A slow legislative process could delay hopes by environmental groups to begin participation in RGGI by January 2024. Regardless of adhering to its timeline, a January 2024 start is unlikely to be met as membership to RGGI is highly contested by the Republican-controlled State Senate and House of Representatives. If becoming a member, the state is expected to have an emissions cap of 35 MtCO2 for its first year with an annual decline of just under 5%. North Carolina would have the second highest-emitting electric power sector if joining RGGI (if Pennsylvania stays in the carbon market), with its electric power sector emitting 37.1MMTCO2e in 2020.

As market activity begins to return as the holiday season has come to an end, the retracement seen over this past week is likely to end. It is unlikely, however, that one will see significant short-term increases in the RGGI V23 Future Dec-23 price, as weak macroeconomic conditions persist. Rather, the dip in prices will stabilize over the coming week. Virginia and Pennsylvania are set to continue legal proceedings regarding their future status in RGGI in 2023. Therefore, the uncertainty that has afflicted the market is likely to dissuade any major increases in market activity and speculative interest in the short term.

For more information related to RGGI please contact 

W1: WCI

Price for CCA V23 Future Dec-23 contract fall this week, prices expected to stabilize in the coming next week

Information regarding settlement price and volume traded from 27 December in the graph above pertains to the CCA V23 Future Dec-23 contract, as expiry for the CCA V22 Future Dec-22 contract has taken place. The front-rolling contract closed at a settlement price of USD 30.86/t on 27 December, 8.09% higher than the CCA V22 Future Dec-22 contract’s last settlement price before expiry of USD 28.55/t. The contract has since come down to a closing price on Thursday (05 January) of USD 29.40/t. This is a 2.97% decrease from last Thursday’s closing price of USD 30.30/t. The drop in the contract’s price is reflective of market entities beginning to settle into their long positions entering 2023.

The downward trend in the contract price comes from a decrease in bullish sentiment seen by market entities at the close of 2022. The heightened market activity comes from market entities trying to increase profits before the year’s end as well as taking long positions in response to potential long-term changes to the cap-and-trade system from the 2022 Scoping Plan. Market trends this week are, therefore, a retracement from the high market activity for the CCA V23 Future Dec-23 contract seen at the end of December.

Lower contract prices are also a response to decreased market activity from the holiday season. A lack of trading from holiday office closures has decreased liquidity, and, therefore, the price of the CCA V23 Future Dec-23 contract. This trend is furthered through continued poor macroeconomic conditions such as high interest rates and inflation that have deterred market activity over the past several months.

Market prices for the CCA V23 Future Dec-23 contract are expected to stabilize this week, discontinuing the retracement seen since the start of the new year. As companies reopen full operations after the holidays increased market activity will follow, making the contract more liquid. 

The current rate at which prices have decreased for the contract this past week is also expected to decrease due to poor weather conditions on the West Coast. A major cyclone has hit Northern and Central California this week and poor weather conditions will continue this weekend. Major floods, wind, and snow in certain areas are expected to increase energy demand in the state and consequently raise demand for carbon allowances by compliance entities.

Long-term price increases in the contract are expected as entities requesting to join the carbon market in California have sharply increased this past year. As California is set to review its carbon market’s role in achieving the decarbonization targets set out in its 2022 Scoping Plan this year, increased market activity and long positions are expected before there is a tightening of the emissions cap and allowance supply that would subsequently increase market prices.

For more information related to WCI please contact 

W1: K-ETS

How low can it go? Market uncertainty still rampant in the new compliance year

On Thursday (5 Jan), Spot KAU22 finished at KRW 13,300/t (EUR 9.96), following the bearish trend persisting throughout the second half of last year. The market observed a bear market rally during Week 52 of 2022 when the KAU22 contract tried to bounce back, reaching a high at KRW 16,800/t in the first session of 2023 (2 Jan). From 28 December to 2 January, the prices tested around KRW 16,000/t level yet failed to breach it, and corrected downward, sheding 23.31% week-on-week. Prolonged price decline and illiquidity issue are unlikely to be resolved soon, as long as market uncertainty stemming from the oversupply prevails. Although, the volume traded of Spot KAU22 via the exchange peaked on 29 December at 23.5 kt KAUs selling at the VWAP of KRW 16,529/t.

The prices remained well above the trigger price of the market stabilization measure (estimated at around KRW 12,400/t), hovering between KRW 13,300/t and 16,400/t. Even if the market price falls below the trigger price, it is highly unlikely for the measure to be enacted given that the government acknowledged its drawbacks and has been working on its reform.

The designation of two market makers and increased holding limits for the non-ETS companies

 become effective starting January this year. The market is likely to see some increase in the volume of daily transactions due to the market makers’ obligation to provide liquidity. However, it is hard to expect for seven financials to bring a whole new wind to the market. As the looming apprehension on a more stringent ETS cap is affecting compliance companies, it is unlikely that the KAU price will climb up on a significant scale in the short term.

 is scheduled for 11 January, selling only 1 Mt KAUs which is less than half the amount of the monthly offer compared to auctions in 2022. That cut is reflective of persistent signs which have been indicating an oversupply of the market last year. The volume of bids submitted against the total offered slightly recovered in the December auction after it tumbled to an all-time low of one-fourth in the month before. Attention is now focusing on whether this rebound is sustainable or not.

For more information related to the Korea ETS please contact 

W1: China ETS

Further analysis of China ETS will be published in Greenfact’s forthcoming monthly report with the first edition launched in January 2023.

For more information related to the Chinese ETS please contact 

W1: VCM

The market has seen a slow recovery after the holidays

After reaching its lowest prices in the historical series at the beginning of December, the Futures Dec-22 showed a slight recovery in the last week of the month, mainly due to companies catching up on credit purchases to meet their annual offset targets. In the last days of 2022, prices remained stable and no contracts were closed.

On Friday (30 Dec), the closing price for the Dec-22 contracts for CGO, NGO, and GEO were USD 1.23/t, USD 4.12/t, and USD 3.16/t, respectively. The CGO contract had a +13.89% increase from the previous Thursday’s (22 Dec) closing price, for the NGO the variation was +7.57%, and for the GEO the variation was +13.67%.

The front-Dec-23 contracts, on the other hand, started with higher prices at the beginning of the week and dropped down. CGO closed this Thursday (05 Jan) at USD 0.93/t, fluctuating -20.51% from the previous Thursday’s (29 Dec) closing price of USD 1.17/t, NGO closed at USD 5.77/t, a decrease of -14.01% from the previous Thursday closing price of USD 6.71/t, and GEO also had a decrease of-12.36% decrease in comparison to last Thursday price of USD 3.64/t.

Apart from the CGOs, the NGOs and GEOs' contracts increased their prices, comparing the most liquid contracts from Dec-22 to Dec-23. This increase reflects consumers' preference for these last two types of contracts. The total volume of Dec-23 contracts traded since the beginning of this week for CGO was 254, for NGOs was 861 and for GEOs was 76, which is still very timid, but is due to the slow recovery of the markets after the holidays.

When it comes to marketplaces, AirCarbon Exchange (ACX) has exciting news. At the end of last year, they 

their partnership with the American Carbon Registry (ACR) expanding their offers of Emission Reduction Tons (ERTs) on the exchange. And at the beginning of this week, they successfully closed 

 with USD 15 million. Furthermore, the Indian Energy Exchange (IEX) announced the founding of an entirely subsidiary, International Carbon Exchange Private Ltd (ICX), to explore potential opportunities in the voluntary carbon market.

The last few weeks had great potential of unlocking potential for the generation of nature-based solutions credits. In Indonesia, the Ministry of Environment and Forestry has 

 under the country's new carbon trading regulation. The issuances were suspended earlier this year, which caused a shock to the voluntary market as the country is one of the largest offset-generating nations for avoiding deforestation projects. On the other side of the globe, one of the last decrees of Brazil's ex-president, Jair Bolsonaro, was 

 to ease the generation of voluntary carbon credits by public forest concessions and conservation units. The bill modifies existing laws to allow public forest concession contracts to include selling carbon credits and paying for environmental services products. Shortly after, the new president, Luis Inacio Lula da Silva, 

  for conservation measures which had been frozen since august 2019 by his predecessor.

The substantial drop in prices on CGO contracts in comparison to a slighter one from NGO and GEO shows that the preference for this type of contract is likely to continue into 2023.

This indicates the trend towards high-quality contracts, such as NGOs, and contracts aligned with compliance markets, such as GEOs.The market is expected to warm up and the volume of contracts to resume after the slow recovery of the market after the holidays.

For more information related to the voluntary carbon market please contact 

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GO Week 11 Overview - The 2022 vintage loses ground

Week 11: The benchmark contract remains about the USD 30.00/t threshold this week among regulatory updates and the failure of Silicon Valley Bank

Week 11: EUAs slip on financial market uncertainty, weak auctions

Week 11: VCM has the lowest volumes of future standardized contracts since the beginning of the year

EAC Market Report - In The Midst Of A Bullish Wave

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EU ETS: Without policy updates, weak energy prices have driven EUAs lower

RGGI: RGGI V23 Future Dec-23 contract sees major dip in prices entering 2023
WCI: Market activity for the CCA V23 Future Dec-23 contract lags at the start of the new year, but is expected to pick up

K-ETS: Spot KAU22 closed at below EUR 1/t on the first Thursday of the year 2023

VCM: After the holiday season, contract prices are still falling, and the market is slow to recover

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