So Carbon Tracker concludes in its latest report, analysing the impact of the start-up from January 2019 of the Market Stability Reserve.
“The EU carbon market has been the hottest commodity market in the world over the last 16 months, with the price of European carbon allowances (EUAs) up 310% since May 2017, 120% since the start of the year. …This stunning performance has been driven by the market’s anticipation of the start-up from January 2019 of the Market Stability Reserve (MSR), the centrepiece of the EU-ETS reform agreed last year. With only five months to go before the MSR starts reducing the over-supply of EUAs by 24% of the outstanding cumulative surplus each year over 2019-2023, the market is now counting down to the biggest supply squeeze the EU-ETS has ever seen.”
“The logic of our argument is that the supply squeeze caused by the MSR over 2019-23 will create a cumulative deficit for the power and aviation sectors over these five years of ~ 1.4bn tonnes, and that in order to clear the market over this period power generators will have to reduce emissions via switching from coal to gas.”
It is terrific to see the excellent Mark Lewis in form as the new head of research at Carbon Tracker.
Image: from article