Global carbon markets are in a constant evolution. The market snapshot is produced monthly and provides a high-level overview of the key developments in select compliance and voluntary carbon markets.
*Please note: This snapshot is designed to provide a high-level overview of the key developments in compliance and voluntary carbon markets. Our in-market team produces daily and detailed updates and trade reports to CORE Markets software subscribers and clients. Contact us to find out more.
This month we cover key developments in the Australian, New Zealand and European carbon markets.
The market commenced the month at an opening price of A$31.00 and concluded at A$30.25 for generic units. Meanwhile, HIR units started the month at A$34.25 and ended at A$33.50.
The highlight of the month's activity occurred on the 11th of October with the market clearing large volumes ranging from A$30.50 to A$32.50 for both Generic and ‘Generic No AD’ units. During this month, we observed a softening of prices for the less frequently traded Savannah Burning and Planting units as buyers favoured the more liquid certificates.
The secondary market witnessed a total traded volume of 1.3 million units. The ACCU issuance remained largely unchanged month-on-month, with a total of just over 1.9 million ACCUs being issued in October.
Primary deals experienced heightened activity, as both long-term buyers and sellers sought to secure forward pricing and volumes.
The NZU price was relatively flat at the start of October due to New Zealand’s general election and the expected succession of power to the National Party. Post the mid-month election, the price saw a small up-tick , which was largely priced in, closing the month at NZ$70.00.
The EUA benchmark futures contract opened the month on a downwards trajectory. It tracked the European energy markets that were experiencing lower demand caused by warmer temperatures and a more stable supply from the North Sea. This led the Dec23 EUAs to settle at €79.65 by 3rdOctober.
However, the earlier breach of the key psychological level of €80 triggered sizeable buying interest derived from speculative players wishing to cover their short position. This was reflected in the prices returning to €81.67 by the 4th of the month.
Reports that fossil-fired power generation in the EU dropped 21% year-on-year in the first nine months of 2023 fed into a bearish sentiment and saw the price lull to around €80.50. However, natural gas prices rallied due to the geopolitical tension in the Middle East and reports that a Baltic gas pipeline leak may have been sabotaged. This saw EUA futures reaching its month's high of €85.95 for the Dec23 EUAs.
The second half of the month saw the prices tumble, reaching a 5-month low as bearish fundamentals such as strong renewable output and low EUA demand from power and industry sectors took hold and outweighed the influence of the skittish energy markets, with Dec-23 EUA closing off the month at €79.05.
The international voluntary carbon market started the month on strong footing with a lively start on both the futures and OTC markets.
In the first week of the month, the nature-based CBL N-GEO contract saw over 3 million tCO2 transact in addition to 1.7 million tonnes and 1 million tonnes trading on the C-GEO and GEO futures respectively.
Prices in the market do remain weak and the market continues to be rumbled by integrity questions.
However, a positive trend appears to be emerging in response to these issues, particularly in the REDD sector. Buyers here seek well-established projects which are perceived as high quality and (due to current market sentiment) can often be purchased at historically lower prices, particularly for slightly earlier vintages (such as v2016 and v2017).
Overall, the market still seems to be on hold slightly as it awaits incoming instruments to help tackle ongoing integrity concerns. These instruments include:
In other voluntary carbon market developments:
The events outlined in this month’s update highlight the evolving nature of global carbon markets and the complexity of the net zero transition.
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