Corona benefits the climate: emissions of greenhouse gases in Germany shrank by 8.7% last year to 739 million tonnes. "The reduction in 2020 is the largest annual decrease since the year of German unification in 1990," the Federal Environment Agency said recently. To be sure, the agency makes no secret of the fact that a good third of the reduction comes from pandemic response measures. But at the same time it stresses that the climate policy instruments are beginning to have an effect. In addition to the expansion of renewable energy sources, the Federal Environment Agency points to CO2 trading.
A look at the ICE commodity futures exchange confirms this impression. Recently, the emission rights traded there have become much more expensive. The "ICE ECX Emission" future due in December 2021 climbed above the EUR 40 mark for the first time in February. When the lockdown choked off the economy and transport a good year ago, this contract was only worth a good EUR 15. Like the equity markets, it then experienced a v-shaped rebound. Initially, the price to be paid for the emission of one tonne of CO2 bounced off the horizontal resistance at EUR 30. After several attempts, it managed to jump over this hurdle in December. At more or less the same time, a landmark EU summit took place. In Brussels, the heads of state and government of the European Union agreed to tighten the climate targets: By 2030, greenhouse gas emissions in the EU are to be reduced by at least 55% below the 1990 level. The previous reduction target was 40%.
The European Emissions Trading Scheme (ETS) plays an important role in the implementation of this ambitious target. For a long time, the system introduced in 2005 was regarded as a toothless tiger. With too many allowances on the market, the price languished. In 2017, the ETS was reformed. The Market Stability Reserve (MSR) introduced in the process - it absorbs surplus pollution rights - allowed emissions trading to flourish. In mid-May, the European Commission will issue its next water level report. The volume of allowances that will be added to the MSR from the autumn onwards will depend on the number of allowances in circulation determined at that time. Because of the Corona effect outlined at the beginning, the more than 11,000 energy-intensive companies participating in the ETS should be well supplied with pollution rights. If the Commission confirms this impression, the future could initially come under pressure.
Looking ahead to the rest of the year, however, there is no shortage of positive drivers. For example, the EU is considering including other modes of transport and buildings in the ETS alongside airlines. If it gets serious about this, the demand for pollution rights would probably increase significantly. In any case, the Union will flesh out its climate plans over the coming months. Finally, the 26th World Climate Conference will take place in November. After the new President Joe Biden brought the USA back into the Paris Agreement, the USA is once again at the negotiating table. Climate protection is high on the Democrat's political agenda. In this respect, the conference in Glasgow, Scotland, could amount to a kind of competition for the most ambitious protective measures. Leonteq has issued a new tracker certificate for investors who would like to add the CO2 future to their portfolios. The structured product tracks the December contract traded on the ICE. The last trading day is 16 December 2021 - the underlying expires a few days later.
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