Essay about Market Trends : Major Price Drivers
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
Another major price driver is political event related to climate. The First Commitment Period ended in 2012, and countries were to extend the Kyoto Protocol to the next phase of 2013 - 2020. As the global economy remained weak following the crisis, many countries were hesitant to make further commitments. Developing countries were still excluded from binding reduction targets. Some Annex B countries, including Russia, Japan, Canada and New Zealand, declared that they would withdraw from the Kyoto Protocol. Consequently, while the Second Commitment Period set the target…