Platts Global Compliance Carbon Markets Daily Commentary for Dec. 14

Platts, part of S&P Global Commodity Insights, is publishing the Platts Global Compliance Carbon Markets Daily Commentary for Dec. 14 on Dec. 15 as it was not published earlier.

Below is the commentary for Dec. 15.

The EU and UK compliance carbon markets weakened Dec. 14, while the Asian compliance market was stable to lower as prices in New Zealand, South Korea and Australia were steady with the exception of Generic ACCUs that dropped.

EU

Gains on EU Allowances the past two trading sessions were erased by losses on Dec. 14.

Commenting on EUAs bearishness, a UK-based trader said: "What you saw is almost technical."

The loss followed the over 3% on the day drop in EU gas benchmark TTF futures. "It's been low industrial output," the trader added.

"Storage levels are very high and the price of gas in Europe is bearish in general," an Atlantic-based trader said.

EU gas storage levels stood at 90.09% as of Dec. 12, with a net withdrawal of 0.34% in the region, based on the Aggregated Gas Storage Inventory data.

Led by stronger EUA losses, the spread between EUAs and UK Allowances narrowed across all three futures contracts -- the nearest December 2023, 2024 and 2025 -- by Eur1.08 to Eur28.08/mtCO2e, Eur1.32 to Eur28.56/mtCO2e and Eur1.32 to Eur23.10/mtCO2e, respectively.

Platts assessed EUA nearest December at Eur66.79/mtCO2e ($73.41/mtCO2e), down Eur2.22 on the day.

UK

UK prices slipped on the day following gas bearishness.

A UK-based carbon trader commenting on how UKAs tracked the UK's power generation mix, said: "On a windy day, we are getting 60% of our requirement from renewables, which there will be little thermal generation...UK is basically gas to wind."

According to National Grid Live, the past week's renewable generation was 40.4%, up 4.8% compared with the past year's average.

Led by stronger losses in futures contracts, the spread between spot and nearest December 2023 inverted to a backwardation of GBP0.89/mtCO2e; while the spread between spot and other two futures contracts -- the nearest December 2024 and 2025 – remained in a contango but narrowed to GBP1.50/mtCO2e and GBP8.60/mtCO2e, respectively.

On the same day, the UK government awarded GBP2 billion ($2.5 billion) funding to 11 successful electrolytic hydrogen projects under its first hydrogen allocation round (HAR1), totaling 125 MW.

The successful projects cover eight regions across England, Scotland and Wales, and are the first step towards the government's target of 1 GW of electrolysis in operation or construction by 2025, and 5 GW by 2030.

Platts assessed UKA nearest December at GBP33.34/mtCO2e ($42.53/mtCO2e) Dec. 14, down GBP1.01 on the session.

APAC

New Zealand Unit prices were stable amid lower bids and weak trading activity.

NZUs traded earlier Dec. 14 at NZ$71.50/mtCO2e ($44.40/mtCO2e) for 500 mt, but this was not considered for assessment due to its small volume.

Only one bid and offer were heard through the day at NZ$70.20/mtCO2e and NZ$71.25/mtCO2e, respectively, for 5,000 mt and 1,000 mt each.

Platts assessed the NZU price at NZ$71/mtCO2e, stable on the day.

Australian carbon credit prices fell for Generic ACCUs, while Human-Induced Regeneration ACCUs were stable.

Jarden's Generic ACCUs without avoided deforestation (AD) traded at A$32/mtCO2e ($21.48/mtCO2e) for 10,000 mt, while HIR ACCUs traded at $35/mtCO2e.

There were no bids or offers heard for Generic, No AD and HIR ACCUs through the day.

Platts assessed the Generic ACCU price at A$31.80/mtCO2e, down 15 cents on the session, and HIR ACCUs at A$35/mtCO2e, stable on the day. The HIR-Generic spread widened 15 cents to A$3.20/mtCO2e.

South Korean prices were unchanged after the previous day's auction.

"Not much trading expected due to yesterday's [Dec. 13] auction," a carbon trader said, adding that the results of the auction are unlikely to have any influence on the direction of the market.

Considering the adjusted auction volume, the results were similar to those from previous auctions in 2023, the carbon trader added.

KAU23 prices inched up on the Korea Exchange after falling below Won 10,000/mtCO2e ($7.71/mtCO2e) following the minimum transaction price's removal Dec. 11.

Platts assessed the KAU price at Won 7,700/mtCO2e and KOC at Won 7,500/mtCO2e, both stable on the session.

Platts is part of S&P Global Commodity Insights.