ADVANTAG : Emissions Trading / Carbon Market News (2016-12-19)

Dear Ladies and Gentlemen,

With the beginning of the new week, interest in European pollution rights constantly rose. Among other market factors, the forthcoming decision in the Environment Committee (ENVI) on the reform of the ETS played the driving role.

After the analysis of the amendments, market participants in principle were awaiting a positive signal from the parliamentarians. This drove the price back over the five-euro mark. On Wednesday and Thursday prices were even above 5.10 EUR. After the decisions of the environmental committee became public, the market reacted with a 'buy the rumor, sell the fact'. This led to a drastic correction to just over 4.50 EUR.

In addition to some interesting and ambitious decisions, e.g. the free allocations for sectors with low trading intensity as well as the technical benchmarks that form the basis for the free allocations, two fundamental decisions are highlights. The first one concerns the linear reduction factor by which the annual total quantity of pollution rights in Europe is continuously reduced. This factor is currently still 1.74%. The EU Commission had already proposed increasing this figure to 2.2%, but the environmental committee has now set an annual reduction of 2.4%.

The second ambitious measure is intended to strengthen the market stability reserve in order to deal with the massive surplus of currently more than 2 billion emission allowances. Committee members have agreed that the number of allowances to be auctioned will not be reduced by 12% per year, but by 24% of the annual surpluses, if the annual surplus exceeds 800 million allowances. As a result, twice as many certificates will be withdrawn from the market from 2019, as initially has been planned.

Today, the members of the Environment Council, in other words the specialist ministers of the Member States, are already discussing the reform. However, concrete results would be a surprise as the final vote on the reform will take place next spring in the EU Parliament.

Last Friday the last auction of the year 2016 took place at the EEX in Leipzig. On Monday, January 9, the new auction calendar will start with non-reduced auction volumes. The market responded to a rebound on Friday and is currently continuing the upwards trend.

(Average Quotes Exchange / OTC)
Instrument	2016-12-09	2016-12-09	Change
EUA (Spotmarket)	4.94 EUR	4.47 EUR	+0.47 EUR
EUA (December-2016-Future)	4.93 EUR	4.46 EUR	+0.47 EUR
CER (Spotmarket)	0.30 EUR	0.29 EUR	+0.01 EUR
ICE Brent Crude Oil (Benchmark Future)	55.27 USD	54.68 USD	+0.59 USD
EURO (Currency, Forex)	1.0447 USD	1.0546 USD	-0.0099 USD

(The average exchange quotes and OTC-prices shows the average between bids and ask of several exchanges and OTC markets for carbon emission rights in the ETS. Bid and ask have usually in Spot Market a visible spread. CER CP1 and ERU are eligible in ETS until end of March 2015 and must be swapped into EUA. Crude Oil and Euro Currency shows day-end-exchange quotes. These market information has just an informational character and are no advice or offer to trade carbon emission rights or their futures and options. If you want to unsubscribe, please reply to this mail.)

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With kind regards,

Advantag Brokerage GmbH