Carbon market snapshot
Carbon prices leapt back to mid-March highs, trading firmly above €17.00/tCO2e on Monday. One trigger was a German regional election, which brought in a coalition including the Green Party. As the Green Party is a strong backer of phasing out nuclear power, the market interpreted this as a sign the nuclear plants currently suspended in Germany would not come back on line.
German far curve power prices shot up in response, with Calendar Years 2013 and 2014 having gained almost €1.00/tCO2e by early afternoon. The usual effect of higher German power on carbon was accentuated by the possibility of the generation gap being met with fossil-fuels.
However, analysts pointed out that the gains were purely driven by sentiment, as there had been no firm news on what will happen to nuclear policy in Germany on the back of these elections.
Some traders thought the immediate bullish impact on carbon was more down to buying from speculative traders than demand from EU ETS operators that now expect to emit more. Unless fundamental buying sets in, pent-up length could start to weigh on prices again, they said. Others suggested utilities were now hedging forward power sales, due to a rise in clean dark spreads and the risk of carbon prices surging further in the future.
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