Carbon Market Analysis: Looking for hope in 2012

Germany’s decision to reduce the country’s nuclear capacity will probably generate a structural move in the power market. The nuclear power generation might plunge by 20% following the closures of antiquated power stations, with the shortfall being made up by carbon intensive coal and renewables. Nevertheless the morphology of spreads will change as the marginal traded Kwh will be less clean than in the present case. In spite of the foreseeable increase in renewables, the carbon intensive supply will be fundamental in covering the extra demand. The impact of this reduction could be around 1.5-1.75€ conditioned by economic growth and EUA supply.

eCO2market's spot EUA and CER forecasts

Markets applauded the withholding of supply even if The European Parliament’s industry committee will vote on this proposal on January 24. Even if some appreciate that the market move was overestimated, it gives a clear sign that the EC understands its role in the survival of the ETS and that the only way to control it is via the supply. Most likely the prices will come back to the previous levels but it also brings hope concerning political awareness towards the ETS.

– Dr. Marius-Crisitan Frunza is eCO2market’s Head of Research.

This article also appears in the 21 December 2011 edition of eCO2abacus, our free weekly carbon market newsletter. Please click here to retrieve our current issue as well as our previous editions.

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