Coal news and updates

The recent strength in European carbon prices has pushed forward margins for even the most efficient German coal plants negative for calendar 2024.

 

But the impact of rising carbon prices on coal margins has been less severe closer in on the curve and absent for more immediate delivery periods, as there is little flexibility to displace coal from the power mix at such short notice because of a short supply of gas.

 

The liquid December 2021 EU carbon emission allowance (EUA) reached a recent peak of €56.28/t of CO2 equivalent (CO2e) on 14 May according to Argus' price assessments. This was up by 67pc from €33.70/t CO2e at the start of the year.

 

Carbon prices have been on a sustained upswing since October 2020, which is when the European Parliament approved amendments to the European climate law that would increase the bloc's 2030 greenhouse gas (GHG) emissions reduction target to at least 55pc from 1990 levels, up from 40pc. The December 2021 EUA has gained 94pc in value since that initial parliamentary approval on 7 October 2020.

 

Upward momentum has been strong ever since, but prices accelerated higher at the end of April, after negotiators for EU member states and the European Parliament on 21 April reached a provisional agreement on the legal text setting out a European climate law. This confirmed the 55pc collective net GHG emissions reduction target, although the provisional agreement still needs to be formally approved by EU member states and the parliament.

 

The new, stricter target for EU GHG reductions has spearheaded the rally in carbon prices, as the climate law will probably require a tightening of the EU emissions trading system (ETS). Proposals to this effect are expected to be presented by the European Commission in mid-July, which could keep the market volatile ahead of that date.

 

Carbon prices have this week fallen sharply back to below €50/tCO2e, however, ahead of the UK's first ever ETS auction on 19 May, which made 6.05mn permits available. This has weighed on EU ETS prices as UK firms were expected to move their EU positions over to the UK market, which could leave more EU ETS permits unallocated.

 

 

Source : https://www.argusmedia.com/en/news