Global Market Trends: EUA And CER Prices

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Market Trends

Major price drivers
The fluctuated global carbon price has been driven by a wide range of factors, including political wills, regional and global economy, fossil fuel prices, trading appetite of large corporations, and so on. Even a colder-than-expected winter can be a bullish signal to the carbon market. Historically, two significant price drops occurred as a result of the global financial crisis in 2008 and 2009, and a series of political events at the national and international level around 2012.

The 2008 financial crisis
Figure 2 shows the historical price trend of EUA and CER, the two most important compliance credits. The 2008 financial crises struck the global economy and caused unexpected low GHG emission rates. Demand for carbon credits hence decreased significantly, causing the price crash. The EU debt crisis further weakened the EU ETS.

International and national political events
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In order to addressed surplus issue, the European Commission purposed a “backloading” plan in 2012 to postpone the auction of oversupplied EUA from 2014-16 to 2019-20. The EU Parliament voted against this proposal in April 2012, causing EUA price to drop below €5, a historical low level. Although EU Parliament reversed the decision, the compliance markets never truly recovered from the shocks.

Voluntary markets
Comparing to the compliance markets, the price in voluntary markets has been relatively stable. Figure 3 shows the average price in the voluntary market from 2005 to 2014. As in the compliance market, political will plays an important role in voluntary markets. The US failed to pass the cap-and-trade system in the legislation in 2009 and 2010. This dragged the prices in the Chicago Climate Exchange down to almost zero, and eventually led to an end of the entire trading

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