• Alessandro Vitelli

A record-setting month for the EUETS

The EUETS set all sorts of records in March, hardly surprising given the events around us and their impact on demand for energy and therefore carbon.


There was a period of three or four days when it really was anyone's guess just how far the energy complex might fall before things calmed slightly. We ended the month on an uptick but that didn't erase a number of record parameters.


Most impressively, it was the #1 month ever in terms of volume for the front-Dec contract on the ICE screen, with 677,659 lots changing hands:

March 18th also saw the biggest daily volume (60,700 lots) since March 2014, and we had the biggest ever weekly volume of 234,204 lots in the week ending March 20th.

Last month saw the widest-ever trading range for the front-Dec EUA contract (€9.89):

(Yes, I'm certain that there were larger daily and weekly price drops in Phase 1 around the time that 2005 verified data leaked out – does anyone else remember the scrum around the Reuters screens on the Dresdner stand at Carbon Expo? – but I don't consider Phase 1 to be representative of the real market).


March also returned the biggest price drop in € terms (€5.91) since July 2008, and the largest percentage price drop (-25.03%) since June 2016:

Timespreads have blown out as the pressure of selling drove the spot and front-Dec down faster than the rest of the curve. Spreads are now much wider than the cost of carry, so there's got to be a selling opportunity there:

Aggregate front-Dec volume on ICE is now 178m EUAs ahead of the next best year as of the end of March:

Energy in general….. well, see for yourself. It’s been a weird month:

Here's an index set to March 5, the last day before all hell broke loose:


The drop in power and fuels has brought an improvement for the clean dark spread, but coal is still far away from toppling gas in the merit order:

In fact, for baseload German power the climate spread still points to gas all the way to 2024. The 2022-2024 contracts are trending steadily back towards coal, though:

Price correlations have been a bit hit-and-miss this month as well; carbon started by ignoring the price fall, then it caught up, and now it’s coal that’s ignoring the general sell-off:

In fact, here are two charts for the clean dark/clean spark spreads. The first chart shows what’s actually happened, while the second shows what would have happened if coal prices had moved in line with German baseload:

And the fuel-switching price of carbon has dropped dramatically this month, according to data from Refinitiv. Carbon could theoretically fall to as low as €9/mt before coal gets a look-in:

If you've been following the news you'll know that analysts have been revising their 2020 price projections this month. Here's a brief resume of the updates that came last week:


Refinitiv: €18 average for 2020

Energy Aspects: €21.80 average for 2020

Berenberg: €25 average for 2020

ICIS: €16.30 at end of 2020


These same analysts and others have also been turning their minds to the verified emissions data for 2019. For a long while they've been warning us that power sector emissions will be significantly lower than they were in 2018, after the wave of fuel switching that went on as carbon climbed into the upper €20s.


The consensus is for power sector CO2 to drop by around 120m tonnes, or 12%, from 2018, with industrial emissions are predicted to drop by anything between 7m and 23 tonnes (2.3% on average). That gives us a total of around 1.558b tonnes, which would make for the largest overall drop in volume terms since 2009.

The coronavirus probably sets us up for an even bigger drop for 2020 in a year's time, but let's not get ahead of ourselves...