Posted on Nov 25, 2021, 7:14 PMUpdated Nov 25, 2021, 7:55 PM
Since the end of COP26, carbon seems to have been pumped up to speed. The ton of CO2 has taken no less than 18.5% on the European carbon allowance market since November 15. Its price has more than doubled since the start of the year.
Among the main factors that encouraged this increase, the market seems to have been encouraged by the results of COP26, in particular the agreement on carbon markets. The finalization of Article 6 of the Paris Agreement on carbon credits has drawn the eye of investors to the carbon issue in general and to the European allowances market in particular. Investment funds have notably increased their participation, explains Sebastian Rilling, carbon analyst at ICIS. “The COP26 has helped to give a bullish momentum”, he sums up.
Moreover, if some investors had feared that the surge in carbon prices would push the European Commission to intervene to limit speculation, they would have been completely reassured by the conclusions of the market policeman at the end of last week.
While in the midst of the energy price crisis, some countries worried about the carbon boom and called for an end to speculation in the European market, ESMA concluded that there was no was no market manipulation, or even excessive speculation on the European Emissions Trading System. Following the publication of this preliminary report, the ton of carbon had already approached 70 euros.
Finally, on Wednesday, the new German coalition led by Olaf Scholz announced an early exit from coal and demanded that a carbon floor price of 60 euros be set on the European market. The measure has little chance of succeeding in the European market as a whole, but Berlin says it is ready to introduce it only for German quotas.
A floor price of 60 euros is not wildly ambitious if we consider that the tonne of carbon could in any case exceed 100 euros in 2030. “But that can limit the downside risk”, explains Sebastian Rilling. . As of Wednesday evening, carbon had jumped by more than 5%, to more than 73 euros.
After such a string of records, analysts warn of the risks of a correction. Because if Germany intends to use more renewable energies that generate less emissions, the demand for allowances could well end up falling.