Global Carbon Markets Struggle While War and Inflation Get the Attention — RECS March On (1)

July 18, 2022:

See June 22 data from exchange group ICE here:
https://app.e.theice.com/e/es?s=600958837&e=147166&elqTrackId=517e9526da1943b9bdac060a7ad0525a&elq=818aa9659b4b4ddeb9d85904e47864b0&elqaid=21535&elqat=1

Note how open interest in the Global Environmental Portfolio below – a measure of market bets that have not been closed – is tracking near its lowest for about four years.

ICE is also facing competition from other trading venues.

See link above for the components, reproduced below this snipped chart:

June 2022 ICE Global Environmental Report
Highlights
249,261 lots of futures and options traded across the North American Physical Environmental portfolio, with 57% of volume being in CCA products. 38,355 lots went to delivery in June, with 79% being CCAs. 

UKA futures traded 33,821 lots, a 34% increase over May. June open interest (OI) was 39,383 lots, up 15% on the previous month.

Trading volume from the North American Physical Environmental portfolio was up 18% in the first six months of 2022 over the same time period last year.

On a product level, the following increases in volume occurred in 1H 2022: 
995,063 lots of CCA futures and options traded, an 11% increase over 1H 2021
154,078 lots of RGGI futures and options traded, a 27% increase over 1H 2021
572,592 lots of REC and SREC futures traded, a 23% increase over 1H 2021

Total OI across the North American Physical Environmental portfolio was up 5% on June 30 this year, when compared to June 30, 2021. To view the full suite of North American Physical Environmental products, please click here
Carbon & Renewables
Global Carbon Index Futures:The ICE Global Carbon Index (excess return) reached 783 points on June 3, before settling the month at 779 points.
Nature-Based Carbon Credits
447,000 Credits traded in June, more than doubling what was transacted in May (187,000 credits).
OI also increased to 421,000 credits vs 121,000 at the end of May.
8 firms traded in total, 3 of which were new.

North America:
142,446 lots of CCA futures and options traded this month, with CCA options accounting for 16% of volume. CCA v22 Dec22 settled the month at $31.29, 4% below the month-end settle in May of $32.75. 

24,509 lots of RGGI futures and options traded this month, with options accounting for 4% of volume. RGGI v22 Dec22 settled the month at 14.08, up 1% from the month-end settle in May of $13.90.


Europe:
EUA futures volume was 516,584 lots and EUA options saw 148,261 lots trade. Combined OI was 959,682 lots. EUA December 22 closed the month at €90.16, 7% below the final May settlement price of €84.02.  

On June 22 the European Parliament agreed a common position on the European Union’s Fit for 55 proposals. The European Council, comprising the EU’s Member States, put their proposals forward on June 29.

Trilogue talks will now commence between the European Parliament, the Council, and the Commission to finalise legislation on ETS reform.
Renewables
75,579 lots of REC and SREC futures traded this month, a 19% increase over June 2021.

75% of volume came from PJM Tri RECs.
Key Dates & Events

Nature-Based Carbon Credits
Contract Expiry and Deliveries – Future Last Trade Day July 26 and Delivery Day July 29

North America
Contract Expiry and Deliveries – Option Expiry July 15, Last Trade Day July 26 and Delivery Day July 29. 
CCA Auction #32 will occur on Aug. 17, with 57 mil current allowances and 7.9 mil advanced allowances to be available for sale.
RGGI Auction #57 will occur on Sept. 7, with auction quantities TBD.

Europe
Contract Expiry and Deliveries – Future Last Trade Day July 25 and Delivery Day July 28 
UKA auction dates July 13 and 27 (3,221,500 allowances) 

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