Carbon Market Update – January (EUA, ACU Prices, Q3 FY14)

In our first Carbon Market Update for 2014, we take a closer look at backloading in Europe, and likely impacts on EUA and ACU price trajectories through to 2020. The successful passing of backloading reform through the European Parliament is likely to result in a minor uplift in EUA price expectations, however as noted in previous Briefings,  improved short term sentiment is likely to be the only outcome of the reform’s safe passage. Ultimately, while the success of backloading in Europe has resulted in an initial uplift in EUA prices, uncertainty over the Australian CPM means that these reforms are unlikely to flow through to the domestic market, with a re-designed ETS or ‘baseline and credit’ scheme shaping as a more likely scenario.