European Carbon Prices to Double by End of 2015 Following Back-loading
LONDON, January 8, 2014
LONDON, January 8, 2014 /PRNewswire/ --
Today's positive vote in the Climate Change Committee (CCC) on the EU
Commission´s proposal to change the Auction Regulation constitutes the final
legislative step to implement back-loading.
Back-loading refers to the short-term measure initiated by the EU Commission
aiming to curtail the auction volumes by 900m EUAs in the years 2014-2016 and
re-insert those at a later stage in the third trading period (2019-2020).
Today's vote by the member state representatives in the CCC approved an
amendment to the Auction Regulation specifying the back-loading implementation
volume and timing.
This amendment is now subject to a scrutiny period by the EU Parliament and
the EU Council, which can both object to the adopted piece of legislation.
While the scrutiny period is in theory three months, it is also possible from
a procedural perspective to shorten this period. As a result, a fixed starting
date for the implementation of back-loading has yet to be set.
From a purely fundamental analysis perspective, the market impact of
back-loading should in theory be zero as the market is oversupplied on a
cumulative basis by over 2bn EUAs at the end of 2013, mainly from free
allocation volumes from the second trading period (2008-2012). As the 900m
EUAs will only be temporarily withheld, an efficient market should in
principle balance out the gap with the existing oversupply, which is more than
enough to offset the back-loaded volumes.
From a timing and trading behaviour-based perspective, ICIS EU ETS analysts
expect back-loading to have a significant impact on European carbon prices.
The rationale for this is that carbon markets are not efficient and are for
the main part not driven by fundamentals but rather by the trading behaviour
of market participants and the timing of supply and demand - namely when the
short and long carbon positions of compliance players are traded.
The ICIS Timing Impact Model (TIM), which incorporates the trading behaviour
of compliance players, shows that the EU carbon market will be temporarily
short due to the back-loaded volumes as only a small share of the oversupply
built up in the second trading period will be available to offset the withheld
Furthermore, ICIS analysts expect European carbon prices to increase to
double-digit figures by 2015 with a steady increase from the start of
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Founded in 2010 and based in Karlsruhe, Germany, Tschach has a strong industry
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trading, power markets and clean development mechanisms in the EU in relation
to buying and selling carbon credits.
Standing out from its competitors, Tschach uses a unique Timing Impact Model
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participants' impacts on carbon credit prices.
ICIS is the world's largest petrochemical market information provider and has
fast-growing energy and fertilizer divisions. Our aim is to give companies in
global commodities markets a competitive advantage by delivering trusted
pricing data, high-value news, analysis and independent consulting, enabling
our customers to make better-informed trading and planning decisions. We have
more than 30 years' experience in providing pricing information, news,
analysis and consulting to buyers, sellers and analysts.
With a global staff of more than 800, ICIS has employees based in Houston,
Washington, New York, London, Montpellier, Dusseldorf, Milan, Mumbai,
Singapore, Guangzhou, Beijing, Shanghai, Yantai, Tokyo and Perth. ICIS is a
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