Global Environmentals Newsletter | September 2020
Leipzig, London, 21 September 2020
EEX publishes position paper on increasing the EU’s 2030 climate ambition
The Green Deal aims to align all EU policies with the 2050 climate neutrality objective. A key element for this is the revision of the EU’s 2030 greenhouse gas emissions reduction target and the policy framework to achieve it. The Commission is developing comprehensive plans to increase the EU 2030 climate target. This will include a review of a range of policies that are relevant for emissions markets, most notably the EU Emissions Trading System Directive and the Effort Sharing Regulation. On our website, you’ll find
> EEX’s position paper on increasing the EU’s 2030 climate ambition
In the paper, our main points are:
- EEX supports increasing the EU’s 2030 climate target to at least 55%. Joint action on emissions trading will be a key element for delivering on increased climate ambition. National targets combined with trading of annual emissions allocations as currently in non-ETS sectors are a second-best option.
- A strong carbon market price signal is key to efficient emissions reductions. Free market pricing on the wholesale market is decisive for this, allowing market participants to efficiently manage their exposure on the market. We see proposals to add additional steering elements, such as a carbon floor price, critically.
- The EU ETS should be the backbone of the European recovery plans. Emissions reductions can be achieved at lower cost while the economy is recovering without putting at risk attainment of emissions reduction targets.
- Emissions trading should be expanded to additional sectors of the economy. Inclusion in the EU ETS is the preferred option, national policy initiatives can be an intermediary step. Policy compatibility and a clear commitment and timeframe for swift integration should be key principles for the design of such initiatives.
- Increased climate ambition should be combined with increasing the auctioning share. A continuous increase of the auctioning share during the trading phase would provide the greatest possible predictability for market participants.
- Global cooperation in carbon pricing and climate diplomacy must be further intensified. This offers significant potential for cooperation between different trading schemes, for instance in the form of linking.
If you have any questions or would like to discuss this further, please get in touch with EEX’s Political and Regulatory Affairs Team. We are looking forward to your feedback!
European and North American environmental products continue to show solid growth in 2020
EEX European emissions volumes increased in recent months with July 2020 ranking as the second-best month for EEX in emission futures since the beginning of 2019. Volumes were bolstered by a strong number of active clients, even during traditionally slower summer holiday months and a major bullish move in prices. Trading activity offset lower trade registration volumes on a year-on-year basis. In EEX's primary market, all emission auctions were conducted successfully with robust results. As usual, the auction volume was halved in August which led to slightly higher cover ratios. In July, the EUA market featured high volatility and prices jumped to a 14-year high of EUR 30.80 on 7th July, narrowly missing the all-time high of EUR 31.00 on 16th April, 2006.
In North America, environmental markets on Nodal Exchange continued to show resilience and growth. In 2020, the Nodal environmental market product group hit 75,000 contracts of open interest on August 25th. In July, open interest was up 139% year-on-year and trading volume was up 33% for the first half of 2020 from a year earlier. In partnership with IncubEx, Nodal continued to roll out new contracts, adding the first-ever physically delivered California Low Carbon Fuel Standard contracts in January plus another five renewable energy certificate and renewable fuel futures and options contracts in June. Altogether, Nodal now offers the largest suite of listed environmental products in the world, with 67 futures and options contracts across 42 distinct emissions, renewable energy certificates and renewable fuels markets.
> Link to EEX Group Report: Monthly Press Release Aug
> Link to Press Release: Nodal Exchange achieves new records in environmental futures in Aug
Trade Emissions products without EEX membership
Trading EEX emission products is possible via a direct or indirect market access. Several EEX members – primarily, but not exclusively banks – provide non-members with access to EEX (“Access Provider”). With this kind of access, the non-member itself is not an exchange member of EEX but instead trades via the member ID of the Access Provider. Such access is possible in various forms depending on the offering of the Access Provider and individual preferences. The non-member either uses its own trading front-end, the trading screen of the Access Provider or no front-end at all if everything is handled by the Access Provider. The design of the access defines to which extent the Access Provider can influence the trading activity / orders of the non-member in case the Access Provider remains legally and operationally responsible for all transactions concluded under its member ID.
> List of Access Providers for Non-Members
#EU ETS Phase 4
Transition from Phase 3 to Phase 4
With reference to our previous newsletter, we would like to inform you, that we are on the way to finalize the reflection of the implications for EEX´s product setup. This change is required, as Auctioning of phase 4 emission allowances will start in Jan 2021 and the last phase 3 compliance date is only in April.
As a consequence, there will be a transition period in which phase 3 and 4 allowances will exist in parallel (Jan-April 2021). Futures expiries in this period are still fulfilled with phase 3 allowances and there will be two separate spot products. We expect that the auction product setup will not be affected.
> Previous Newsletter (Feb 20)
> EEX’s contract specifications
EEX Primary Market Auctions
Over the past few months, EEX and Trayport have been working on a joint initiative which aims to publish the auction clearing price (read only) on the Trayport Joule screen. We are very happy to announce, that this initiative is now live. In doing so, we aim to increase the visibility of the auction and take the rising importance for the entire EU ETS into account.
> More info about Trayport
The European Energy Exchange (EEX) is the leading energy exchange in Europe which develops, operates and connects secure, liquid and transparent markets for energy and related products. As part of EEX Group, a global commodity exchange, EEX offers contracts on power, gas and emission allowances as well as freight and agricultural products. EEX also provides registry services as well as auctions for Guarantees of Origin.
EEX is part of Deutsche Börse Group.
EEX and IncubEx jointly develop and expand global environmental and commodity markets. The IncubEx team has considerable experience in the derivatives industry with specific expertise in exchange-traded products and services.