Backloading No Silver Bullet For Australian Carbon Price

ON POINT ANALYSIS – KEY IMPACTS

• The European ENVI Committee has voted in favour of a watered down ‘backloading’ proposal
• Backloading no longer packs the punch required to have a significant impact on the European carbon price.
• Domestically we continue to believe that the Australian carbon price will trade at a material discount to EUA prices as local fundamentals shape the market.
• ACU price expectations are likely to stay at single digits for the foreseeable future.

BACKLOADING PASSES THE FIRST HURDLE

The European Parliament took its first step towards repairing its Emissions Trading Scheme (EU ETS) overnight, voting in favour of a watered down proposal to ‘backload’ carbon allowances from the oversupplied EU ETS.

The original bill, which would have temporarily removed 900 million allowances from the market for five years as a means to shorten oversupply, has been amended to return withdrawn permits to the market sooner – starting from the year after the last allowances are removed. The bill has also been amended to limit any intervention to a “one off”, placing greater emphasis on the need for longer term structural reform to more securely repair the market in the future.

European permits