RSS
New Managers
August 2016
PERSPECTIVES : Zafiro Capital on the EU carbon market
Zafiro Capital bullish on EU carbon market despite Brexit The future of the European Union's Emissions Trading Scheme (EU ETS) going into the second half of 2016 is under some pressure, says Michael Pelton of Zafiro Capital, a Geneva-based commodity fund house founded in 2014. Brexit, the UK referendum vote to leave the EU, "pushed prices to a two-year low of €4.28 on 1st July and led to analysts slashing price forecasts by 25%," he tells Opalesque. "This large drop has led to a loss of confidence in the ETS, yet the majority of analysts still see prices doubling by the end of 2020." How do they maintain their high expectations and by what means will the ETS manage to meet them?
The EU ETS is the largest cap-and-trade scheme in the world. It was launched in 2005 to promote the reduction of greenhouse gas emissions. It restricts the volume of greenhouse gases that can be emitted by energy-intensive industry, power producers and airlines. Emission allowances are capped at a level set by the EU, and companies either receive or buy individual allowances. The cap is reduced over time so that the amount of emissions gradually decreases. Recent years' drop in emissions and consequent lower demand for emission allowances have led to a decrease in carbon price and an accumulation of surplus of allowances. The EU recently decided to create market stability reserve (MSR) for the EU ETS, in order to correct the surplus and to make the system more resilient in relation to supply-demand imbalances. In July 2015, the Commission proposed to take the European Council's guidance on the role the EU ETS should play in achieving the EU's 2030 greenhouse gas emission reduction target, and make it law. UK MEP Ian Duncan, who was appointed EU-ETS reform rapporteur last year, put forward his draft report on post-2020 ETS in early June 2016...................... To view our full article please login
|
|
|
