News

EU vs. CO2, Part in a Row

– 27 September 2024

Description

The European Union’s Emissions Trading System (EU ETS) is entering a new phase of pressure and transformation. The latest installment in the “EU vs. CO₂” series, penned by Pavel Sheytanov, Corporate Trader at Vertis, explores how the carbon market’s evolution is exerting profound financial and strategic stress on industry.

Key insights include:

  • How the EU ETS’ cap-and-trade model is structured, with over 12,000 installations under its scope across energy, metallurgy, cement, and transport sectors.
  • The system’s current quota distribution: nearly 43% of allowances are allocated for free, while 57% are auctioned, with proceeds supporting decarbonisation programs and clean energy investments.
  • Recent carbon price dynamics: in 2023, the average EUA price rose to ≈ €83, but in 2024, market fluctuations have pushed prices to a range of €51 to €75, influenced by higher supply (notably driven by RePowerEU adjustments) and falling emissions in electricity generation.
  • Forecasts for 2026 and beyond: significant reductions in free allocations, integration of maritime shipping, elimination of free quotas for aviation, and a one-time cut of 27 million quotas are expected to tighten the market and increase long-term upward pressure on prices.

In this article, we will distill how these developments affect companies subject to EU ETS, the market signals to watch, and strategic levers that businesses can adopt now to anticipate tighter constraints ahead.

Read the full article

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