Carbon market: Industry reveals sharp uptick in confidence in EU ETS following reforms

14 June 2018 | Trading

Annual Point Carbon survey suggests European Emissions Trading System driving more real emissions reductions

The European Emissions Trading System (ETS) is set to become an increasingly important tool for decarbonisation, thanks to recent reforms.

That is the view of a growing number of carbon market participants, according to a new survey of 370 traders and analysts, released yesterday by the Thomson Reuters Point Carbon team.

According to the annual update, a rally in the carbon price within the EU ETS from €4.50 per tonne to €16 per tonne, driven in large part by impending reforms agreed last year by the EU, has prompted a sharp uptick in confidence in the scheme's effectiveness.

The survey found that just 17 per cent of industry and utility respondents in the EU said they hold a surplus of carbon credits, less than half the share of last year. Meanwhile, 43 per cent said the EU ETS is driving emissions reduction efforts right now, compared to 24 per cent in 2017.

"More respondents say the EU ETS causes them to reduce emissions, and simultaneously they report holding fewer allowances," said Anders Nordeng, lead analyst behind the report. "We read the result as sign of a market preparing for a future tightness as the Market Stability Reserve will start to hold back allowances from the auctions in half a year's time."

Around the world, support for carbon markets hit a record high, with 80 per cent of respondents saying it is the "the best [instrument to tackle global warming] we can agree on nationally and internationally".

Meanwhile, most expect the use of such systems to grow in the future, with half of respondents forecasting China's nationwide ETS to start in 2020.

"The support for carbon markets among stakeholders is the strongest we have recorded, and we believe this reflects increased confidence and less uncertainty after concluding reforms in many markets", added Point Carbon analyst Frank Melum.



Source: Business Green