Shall I still buy allowances at 10 euro?

2018-02-14 09:30

After reaching 9.56 euro in January, the EUA Dec18 hit 10 euro 14 February.

Companies with a compliance obligation ask themselves, if they should buy the allowances at the current level or wait for the price to go down.
The carbon market has been very volatile since the beginning and market participants got used to see the EUA price increase for a certain period, but fall back lower later.
This year, however, seems to be an exemption.
The carbon price moves in an increasing trend since May 2017. There were some short periods, when the price fell down, but the overall trend remained unhurt. The market does still not show any signs of reversal.
What to do?
If you need allowances to cover your 2017 emissions, you better do not risk non-compliance, because you were waiting for the price to fall. Even if you see your 2018 free allocation on your account soon, it might be wise to keep them for the future when your free allocation will be lower and the price of allowances higher. We propose not to use your 2018 free allocation to cover your 2017 emissions.
If you do not need many allowances, you can buy all of them in one tranche. If your shortage is significant, you might divide the volume in 2-4 tranches and achieve this way a good average of the price until April.
Planning long-term, you might consider purchasing a call option that guarantees your future maximum price, but keeps your freedom, should the price fall.
It might be a brave thing to go against the market and the chart, but at the same time, it is also very risky.
At Vertis, we have helped more than 1,000 companies across all sectors within the EU ETS to work on their compliance plan. Call your trader, if you want to know more! 

Call us via Skype or contact directly our traders.

Falguera, Marc - ES
Bujacz, Tomasz - PL
Wilamowski, Bartosz - PL
Verger, Guillaume - FR
José M. García Berrendero - ES, PT
Abajas, Africa - Aviation
Gordziel, Christian - DE
Härmatis, Alexandra - SE, NO, DK

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