The CO2 market, triggered by the expectation of a reactivation of the economy

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The news about vaccines has caused a rebound in international markets, especially in oil, with a sharp rise of more than 8% in the price of crude oil. And that of carbon could not be less. Growing optimism from the announcement pushed the intraday price of carbon to levels last seen in early October.

The price of emission rights rose 4.4% compared to the previous day, closing at 26.55 euros.

The price of carbon in the Emissions Trading (ETS EU) walk back to september levels, 30 euros / Tn CO2, when he was marking highs not seen since August 2019.

This market depends on electricity demand and the economic situation of the European Union. If the economy grows, the industry produces more in anticipation of higher demand and electricity consumption also skyrockets.

US influence

“The European CO2 market is affected by what the energy policy will be on the other side of the Atlantic, but not in a definitive way,” he explains to Invertia Jose Maria Garcia Berrendero, corporate trader from Vertis Environmental Finance, a consultancy firm specializing in the purchase and sale of CO2 rights.

“You play with expectations, and the financial markets, which ultimately influence CO2, already moved when it was announced that Biden could be the winner of the US Elections.”

“But these elections are like a bottle of champagne, now everyone has their eyes on them, but after a few days, the governments of the European countries return to focus on how to make sure that between now and the end of the year the consumption, “he adds. Do not forget “that you know how January and February tend to be.”

Brexit yes or no

And while the world talks about the US presidential elections and vaccines to control the pandemic, an agreement on the Brexi. An issue that has had the EU ETS system in suspense for months but now it seems that it no longer affects.

“In the case of Brexit there should have been an agreement in October but it seems that a train crash between the United Kingdom and the European Union is expected by the end of the year,” concludes the expert.

In any case, “the industries that participate in this market have already discounted the exit of the United Kingdom for quite some time, and it is expected that, apart from Brexit, the CO2 price keep rising throughout this quarter and the first of 2021 “.

Although he acknowledges that “it will depend on the economic situation, and this is, to this day, unknown.”

CO2 in electricity

The EU carbon market is the bloc’s flagship policy to reduce emissions of greenhouse gases, forcing power plants, factories and airlines to buy permits to cover some of the emissions they produce.

This market depends on electricity demand and the economic situation of the European Union. If the economy grows, the industry produces more in anticipation of higher demand and electricity consumption also skyrockets.

If the price of CO2 continues to rise, it will displace the most polluting technologies, such as coal or gas. The immediate consequence is that more coal will be stopped burning, which in recent months has fallen to historic levels in Europe. If there is no other backup technology that can replace gas, electricity prices will rise, due to greater consumption of this fuel in combined cycles.

A climb that some see with good eyes to continue on the path of decarbonization. A group of German experts considers it necessary to go up to 50 euros / Tn CO2 for what the European Union meets its ambitious post-Covid green recovery plan and the climate targets of its Green Deal.

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