Abstract
Overview
Introduction
Against a backdrop of challenging carbon abatement targets and reduced
European carbon emission allocations, the role of traded carbon markets is
growing in importance as the second leg of the EU-ETS takes effect. The
marketing and product development for carbon financial instruments is growing
rapidly as greater volumes are swapped on increasingly liquid platforms across
Europe
Scope
- An overview of the Kyoto Protocol, climate change regulations, emissions
trading and carbon markets, with a particular emphasis on phase 2 of EU-ETS
- Detailed analysis of Phase 2 of ETS and the bullish implications for EUA
demand and pricing against a backdrop of considerable upside risk
- Insight as to why demand for carbon credits will differ greatly across
Europe, underpinned by generation mix and fuel switching capabilities analysis
- A range of carbon compliance scenarios based on the likely evolution of
the power generation mix in key EU markets and the impact on carbon markets
Report Highlights
The over-allocation of EUAs and ensuing lack of price-tension seen during
phase 1 of EU-ETS will not be repeated in Phase 2. The phase 2 cap - well
below 2007 adjusted emissions - has set the tone for a very ambitious
energy-policy package out to 2020 which points to significantly higher carbon
prices and demand over 2008-20
The optimal compliance strategy for the ETS as a whole is to use the largest
possible allocation of carbon credits during Phase 2, thereby minimizing the
cost of compliance in Phase 2 to the €40/t implied by the LRMC curve while
buying time to build the extra switching capacity needed to meet the cap over
Phase 3
Reasons to Purchase
- Understand how carbon markets are likely to evolve as key European players
leverage switching capabilities within their power generation mix
- Leverage Phase 2 of the EU-ETS to your advantage having understood how
demand, supply and price conditions are likely to evolve in key EU markets
- Formulate and apply successful strategies to leverage greater demand for
financial carbon instruments as liquidity and price efficiencies materialise
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