The story goes that in 2006, the first set of verified emissions data leaked out about a week before the due date, during the annual Carbon Expo event in Cologne. The data showed that the EU ETS was massively oversupplied in Phase 1 and the market crashed on this information.
The story also says that key data from this accidental leak were uploaded to one or another news service, which was displayed on a screen at the Dresdner Kleinwort exhibition stand in the main hall.
Pretty much anyone involved in the market attended the event, and there was a royal scrum of traders crowded around the Kleinwort stand, staring up at the screen and jotting down numbers. Prices started to tumble and didn’t stop.
The December 2006 EUA futures price during Feb-Aug 2006
All of this is true - up to a point. People like me have busily mythologised that Carbon Expo, and after mentioning it today on Twitter, I decided to check myself.
Carbon Expo 2006 was held over three days between May 10-12, 2006. If you look back at historical data for EUAs, you’ll see that prices did indeed decline during those three days, from €13.25 on May 10 to as low as €8.60 on Friday May 12.
But in fact, the real crash started happening on April 20 (opening at €30.65) and went on until May 2 (settling at €11.40).
So how come prices dropped like a stone before Carbon Expo and why don’t we remember that nine-day stretch instead?
Sadly I can’t relate this first-hand, but I talked to several traders at the time who had attended a smaller, nameless, event in April. At this event, a Dutch ministry official, not yet understanding the implications of his remarks, reportedly said that Dutch emissions in 2005 were far below the country’s allocation of EUAs (there were no auctions in Phase 1).
As soon as he’d said this, reportedly, a number of the audience quickly got up and walked out of the conference hall grasping their phones.
And the rest is (apparently not very well-remembered) history. Prices started collapsing far earlier than the Carbon Expo, but it was in Cologne where the leaked Commission data confirmed what the lucky few had learned almost a month earlier.
Of course, if I've misremembered this too, then I rely on contemporaries to set me straight. You know where to find me.