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Environmental Newsletter | Oct 2022 |  |
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| | | Dear customers, partners and friends of EEX,
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The summer season is behind us and the last quarter of the year is already in full swing. CO2 primary market volumes are back to the full level and, despite high volatility and a tense market situation, we’ve seen new participants starting to trade on EEX. Also on the product side, we’re moving ahead with various ETS initiatives. Talking about prices, we’re currently seeing a decrease in price levels which ended up at € 66.73 at the end of September – 32% less than the peaks that we saw in August (19th August: € 98.01).
All of this, of course, also relates to the discussions on the EU ETS policy at the European level, which was heavily influenced by the energy market situation. Negotiations between the Council and European Parliament on the “Fit for 55 Package” are ongoing and there seem to be positive signs that a deal on the EU ETS review might be reached in the coming months. This will give the market clarity on the future cap as well as the inclusion of the maritime sector, whilst free allocation for industrial sectors might go down and a potential second EU ETS for road transport/heating might be established. In parallel, the institutions are discussing how to raise 20 billion euro by using ETS revenue, by potentially frontloading auctions or using the MSR and/or Innovation Fund. We will keep you posted on this in our next newsletters.
Furthermore, at an international level, discussions focus on how articles 6.2 and 6.4 of the Paris Agreement can be implemented. Of course, this relates to voluntary carbon market (VCM) credits and international cooperation.
This newsletter will provide you with more insights about what’s going on in the EEX markets.
We hope that you will enjoy reading our newsletter.
Best regards
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Steffen Köhler
| COO | EEX
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| Net Zero Markets, a spin-off from award-winning carbon risk management firm Redshaw Advisors, has partnered with EEX Group to list the ‘GER’ product globally. The GER is a ground-breaking tool that will enable businesses, big and small, to turn their net zero ambitions into reality. This innovative carbon contract will allow companies to implement their net zero strategies and offset those unavoidable carbon emissions with one, transparent, simple-to-use and future-proof instrument.
The GER is the first contract of its kind to include a growing proportion of the vital carbon removal projects that will be essential in reaching net zero targets.
Key facts:- A single global reference price for the Voluntary Carbon Market, creating transparency and liquidity.
- A pathway to Net Zero, providing an Oxford Principles aligned increasing portion of long-lived removals, ultimately being based solely on them by 2050.
- Composition reflects changing market trends, guided by the users of the VCM. The mix of offsets reflects the type of credits retired by offsetters.
- Available to transact globally, on a variety of exchanges as spot or futures with the ability to tokenise.
The GER has recently launched as a spot contract on AirCarbon Exchange (ACX) and as a futures contract on Nodal Exchange, part of EEX Group. If you would like to know more about the GER and Net Zero Markets, please contact info@netzeromarkets.co
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| EEX Group and IncubEx extend cooperation | | EEX Group and IncubEx announced a new cooperation agreement, to grow and expand listed environmental markets on EEX and Nodal Exchange.
The long-term agreement extends the collaboration and builds on the significant progress made since the initial cooperation between EEX Group and IncubEx, which increased the environmental product range and liquidity in European and North American markets.
In Europe, EEX and IncubEx bolstered EEX’s listed European Union Allowance (EUA) derivatives market into the second leading exchange venue. The Open Interest market share in the EUA futures contract has increased from 5% in 2017 to 22% today. Collectively, EEX and Nodal Exchange – the US arm of EEX Group – now offer the broadest global suite of listed environmental futures and options contracts, including carbon allowances and offsets, renewable energy certificates (RECs) and renewable fuel credits. The cooperation between IncubEx and EEX Group successfully started in Europe and was later extended to North America.
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| | Fit for 55 – is Shipping running out of time? | | In our latest episode of Talking OTC Commodities, Michael Mervyn-Jones and Richard Heath discuss the ongoing transition to greener shipping with Tjard Juergens, Stefan Schindler and Patrick Schwinke from ZEABORN Ship Management and specifically examine just how ready the shipping industry is when it comes to EU ETS readiness.
In the podcast, the panel chat on the progress made since the “Fit for 55” package was announced just over a year ago and highlight key areas which require further clarification including transparency of the political process, the importance of credible MRV data and who is ultimately responsible when it comes to paying the costs.
If you have any questions relating to this episode, please contact Richard Heath or Michael Mervyn-Jones.
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FOR ALL VIDEO CONTENT - MAKE SURE TO CHECK OUT EEX TV
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| North American carbon and REC markets growing on Nodal | | North American environmental markets have continued to show resilience over the summer months, despite some uncertainty over the California and Regional Greenhouse Gas Initiative (RGGI) programs.
While California CCA prices have drifted down from around $33 in June to under $28, the focus is on the California Air Resources Board's plans to revise its scoping plan for carbon emissions by 2030. The plans are expected to be completed before year end.
Meanwhile, RGGI market participants are watching what will happen with two states, as prices have largely remained range-bound at around $13.50 to $14. Pennsylvania is looking to enter the market, although it is facing legal challenges. And Virginia is pursuing a plan to exit RGGI after joining the 10-state group in January 2021.
Open interest in RGGI futures on Nodal reached a new high of 24,980 in September, while the CCA open interest continued to climb, reaching more than 9,000 contracts in July.
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| Meanwhile, renewable energy certificate (REC) markets posted steady growth on Nodal with open interest in the REC category reaching nearly 180,000 contracts in May. Texas CRS wind and solar futures and options continued to grow in volume and open interest over the first nine months of 2022. Texas CRS contracts, also known as voluntary REC contracts, because they can be used by companies seeking to voluntarily run their operations on renewable power, approached 40,000 contracts, which corresponds to 40 million MWh of renewable power. Other noteworthy voluntary REC contracts on Nodal include, WREGIS CRS wind REC futures, which were launched in June.
The total open interest across all environmental products on Nodal topped 200,000 contracts in June and then again in September, following large delivery months.
Going forward, carbon markets in North America will continue to be policy-driven. REC markets will also continue to mature, as more companies turn to renewable power for their operations.
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Trading & risk management software
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| Now part of EEX Group, Lacima is a multi-award winning energy and commodity analytics company that empowers confident decision-making for energy and commodity market participants through superior innovative analytics. Talk to us about our solutions to help you exploit the value potential and manage your risk with the current high volatility and extreme prices in Europe and Asia.
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Touchpoint – EEX Group’s new OTC solution
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| On 8th September, EEX launched its trade registration platform for Brokers, Clearing Members and Trading Participants at The Ned in London. For the first time ever, Touchpoint brings together all EEX asset classes in a single, feature-rich, intuitive, and easy-to-use platform. Before the launch we held webinars introducing the full suite of trade administration services and tools: Find the recordings over on EEX TV or click on the link below for more information.
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EEX Group Sustainability conference
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| On 8th September, EEX Group held its first EEX Group Sustainability Conference – Building Sustainable Markets Together. More than 150 guests followed our invitation to discuss how we as an exchange group can make a tangible difference to decarbonisation. Watch the recording of the conference now on EEX TV.
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