2014 auction volumes flat, common platform most used

Silvia Molteni

18-Dec-2014

Auction demand has remained constant year on year, data from carbon exchanges show, although lower volumes were up for sale and carbon emissions are expected to decrease.

Firms included in the EU emissions trading system (ETS) requested a total 2.6bn spot EUAs in 2014 in the 218 auctions held in 2014 on the platforms hosted by the European Energy Exchange and ICE Futures Europe. This is the same as the volume requested in the 235 sales held in 2013.

Volumes were steady although demand for permits to cover 2014 emissions is expected to be lower than 2013, mainly because of a decrease in the CO2 output from the power sector.

As supply was cut as part of a temporary measure to support carbon prices known as back-loading, auction volumes declined by 36% year on year to 528m EUAs.

The EU ETS directive has been amended to delay the auction of 900m EUAs, initially due to be sold between 2014-2016 to 2019-2020.

Since auction demand remained constant, the average cover ratio – an indicator of demand relative to supply – increased to 5.26 from 3.21 in 2013.

Croatia, Norway, Iceland and Liechtenstein, expected to sell their 2013 and 2014 allowances this year, haven’t started auctioning yet. The European Commission has included them in the 2015 auction calendar (see EDCM 10 October 2015).

EU common platform most in demand

The EU common platform operated by EEX, hosting sales from 25 EU countries, remains the main venue where firms buy permits.

Germany also sells its spot EUAs on the Leipzing-based bourse but on a separate opt-out platform. The UK instead has chosen ICE Futures Europe as its platform.

The average cover ratio of the auctions held on the EU common platform confirmed to be the highest in 2014, as the volume bid exceeded supply by 5.8 times. German auctions were 5.01 times oversubscribed on average, while UK auctions 2.82 times.

This is similar to 2013, when EU auctions were the most oversubscribed at 3.42, followed by German auctions (3) and UK auctions (2.38).

The number of firms allowed to take part to auctions increased to 67 in 2014, according to the Q1-Q3 data.

Still, the primary market mainly remains in large players domain. Since the product on sale are spot EUAs, the buyers have to be able to financially settle the transaction immediately.

Typically, the main auction buyers are speculators such as banks and investment firms and power utilities. According to the latest data available for the EU common platform, in the first nine months of the year auction supply has been mainly bought by firms with compliance obligation (58%), while speculators snapped up the remaining. Silvia Molteni

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