European carbon

Published at 12:15 4 Dec 2017 by

Brexit continued to dominate the ETS last week, with countries in the EU’s Climate Change Committee agreeing on Thursday to the revised registry regulation clause that takes on board a proposal from the UK to move the compliance deadline. The proposed revised regulation still provides rules for marking and restricting the use of allowances issued by the UK from 1 January 2018, but with the added proviso that this would not apply if EU law continues to apply in the UK by 30 April 2019, and/or it is ensured that the surrender of EUAs would take place for 2018 compliance by no later than 15 March 2019. The pressure is now on the UK to make sure that it passes a law that would move the compliance deadline to 15 March 2019 from the end of April 2019. If that is achieved, it would appear to largely avert the risk to EUA supply in 2018, due to UK EUAs taking on a different risk profile. If the UK law is not passed by year-end (the UK Parliament goes into Christmas recess on 21 December), UK auction supply could be disrupted until such a law was passed. EEX released its 2018 EUA auction calendar last week. The UK is the only country to use the separate ICE platform, so UK EUA auction dates were not included in the EEX calendar. The 2018 EEX volumes are slightly down on 2017 volumes, at 837 Mt, down 8.7 Mt (2%) y/y as some volumes from previous years were auctioned in 2017. As such, the supply fundamentals of the ETS are largely going to be the same in 2018 as they were in 2017. ICE has not yet released UK auction volumes, presumably as timings can only be determined once the UK passes the law to bring forward the compliance date. For 2018, the flow of ETS-specific policy should be far less important in driving prices, although bills in related subjects—like BREF or new vehicles emissions standards—will still have implications for the European carbon market. 

 

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