From Platts, February 22:
US power and gas markets will be watching for recovery in the Texas energy system after extreme weather conditions caused havoc last week, illustrated by our first two charts today. Plus, EU emissions prices continue to break new records, Asian refiners are sanguine in the face of Saudi Arabian oil allocation cuts, and dry bulk shipping rates are likely to get a boost from Brazil's soybean harvest....
.... 3. EU carbon rally hints at next stage in decarbonization
What's happening? EU carbon emissions allowances are trading at close to all-time highs of Eur40/mt after an unusually cold snap in Europe combined with bullish sentiment over an expected longer-term tightening of supply. A return to milder spring temperatures has seen prices ease back slightly to around Eur38/mt, and the downward price pressure could intensify as nuclear generation returns, taking the pressure off fossil power generation.
What's next? While the short-term fundamentals may look bearish, carbon is a forward-looking market and the long-term supply picture is set to tighten as EU regulators position the EU Emissions Trading System to deliver on the bloc's tougher 2030 emissions reduction goal of 55% below 1990 levels. In practice, tighter supply means the market's key price-setting activity may eventually move away from coal-to-gas fuel switching for electricity generation to the next cheapest area of marginal CO2 abatement. That's likely to require the industrial sectors—such as metals, chemicals, cement and potentially hydrogen producers—to find ways to cut CO2 emissions, and the costs could be a lot higher than the Eur25/mt average carbon price seen in 2020....
Reporting and analysis by Morris Greenberg, Ira Joseph, Luke Jackson, Frank Watson, Philip Vahn, Pankaj Rao, Mark Tan, Oceana Zhou and Hugo Mackay
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