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European emissions trading: record for CO2 certificates

D.he price for CO2 certificates in European emissions trading is currently racing from record to record. After it had jumped to 31 euros last week in connection with the negotiations on a higher EU climate target, it even jumped the 32 euros mark on Tuesday. A certificate entitles power plant operators as well as parts of industry and aviation to emit one ton of carbon dioxide. It can be acquired at auctions or in free trading on energy exchanges such as the Leipzig EEX. As the amount of certificates traded is continuously being reduced, emissions trading is intended to stimulate investments in connection with climate-friendly technologies.

The price has long since recovered from the corona-related slump to 15 euros in March. After small setbacks in the summer, the trend has been increasing since the beginning of November – not exactly to the delight of the industry, which has always suspected that certificates are also a popular object of speculation for investors.

From the point of view of observers, however, speculation explains the recent price increase only to a limited extent. “It seems that companies and market participants are looking through the crisis in a similar way to the stock markets,” says Ingo Ramming, commodities specialist at Commerzbank. “What is decisive is the expected shortage in the future and less the current weakness of the economy.” The planned increase in the EU climate target for 2030 – which could result in an even greater shortage of certificates – reinforces this effect. In addition, there is the special effect that the EU will not auction any emission rights until at least the end of January. “This limited offer should support prices for the next few weeks,” says Ramming.

The Brexit uncertainty and failures in gas deliveries in Norway have also fueled the demand for certificates, adds Marcus Ferdinand from the Icis consultancy. The same applies to the strike by French nuclear workers, which led to increased demand for electricity from more CO2-intensive power plants. However, it is not clear whether the price increase will continue. The energy consultant does not rule out profit-taking. Most retailers would have already priced in a more ambitious 2030 climate target and could now want to sell – “which can lead to a price correction at the end of the year,” says Ferdinand.

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