Co2 Market

Hanging by a thread… called Donald Trump


A total of 6 gigatonnes emission shares including emission permits and credit offsetting were totally exchanged on all regional and national ETS markets in 2016. The price of the emission shares on the European market, which is world’s largest market, has significantly diminished, with a corresponding decrease in the market value from 49 to 34 billions (equal to a 31% reduction).

After a very good 2015 for North America 2016 was not equally positive, with strong reductions registered especially in the volumes exchanged on the WCI and on the Rggi market. In the USA all eyes are now on President Trump and the approach he will adopt to the legacy of the Obama administration when it comes to climate mitigation policies.

China and South Korea have, instead, have witnessed a remarkable growth, although volumes are still limited compared to other markets.

Global Carbon Market 2014-2016

2014 2015 2016 2016
Million Euros Million Euros Million Euros Million Euros Million Euros Million Euros y-o-y change in value Share of total value (2016)
Europe (EUA, EUAA) 6,949 41,226 5,073 38,358 5,245 27,744 -28% 82%
CERs 185 110 100 87 49 63 -28% 1%
ERUs 18 2
USA (CCAs, RGAs, offsets) 472 3,320 1,042 10,633 544 5,070 52% 15%
South Korea (KAUs, offsets) 1.2 11 5 62 464% 1%
Chinese Pilot schemes (allowances,offsets) 29 165 70 160 113 202 26% 1%
New Zealand 76 774 2%
Other markets 1.3 0.8 2 4


A total of 5.2 gigatonnes, i.e. about 3% more compared to 2015, were totally exchanged on the European market. The average annual price of emission permits registered a sharp decrease, instead, going from 7.8 €/t to 5.36 €/t, i.e. equal to a 31%. reduction After the positive price trend registered over the last two years, in first five January weeks the price has astonishingly lost well over 50%. Analysts believe that this sharp decrease in prices has to be attributed to speculative interventions. This assumption is due to the large number of sales over a short period of time, furthermore especially soon after the Christmas holidays, i.e. in a period of time where there is very little movement on the market. The collapse of the EUA has been partly due also to the 25% decrease registered on the oil market in the first three weeks of January. It is furthermore worth pointing out that a high surplus of emission shares still characterises the European market, whereby the measures adopted so far have not helped fully and effectively absorb this surplus.

Stabilisation of prices around 5 €/t in February and March. Prices slightly increased between April and March, bringing the Eua close to 6 €/t, with oscillations mainly driven by the expectations related to the British referendum that was going to be held in June. However, it was easy to understand that the result led to a new drop in prices, which were comprised between 4.40 €/t and 5 €/t during the summer. The UK decision to leave the European Union has dramatically changed the European political scenario and lead to deep uncertainty on all markets.

The European Commission put forward its review proposal for phase 5 in July 2015. Its aim is to align the ETS system with the 40% reduction target that Europe intends to reach by 2030. Based on the original programmes, the details of the reform should have been the subject of the review at this stage. However, new proposals have emerged due to the continuous drop in prices, with the aim of further consolidating the price of emission permits.

EU-ETS by segment

2014 2015 2016
Mt Million Euros Mt Million Euros Mt Million Euros
EUAs Action 535 3,155 646 4,912 724 3,788
EUAs exchange traded 5,721 34,857 3,959 30,763 4,128 22,516
EUAs OTC 450 2,775 323 2,485 230 1,203
EUAs Options 234 385 129 168 156 202
Aviation Euas 10 54 16 30 7 35
CERs exchange traded 97 37 37 18 8 3
CERs OTC traded 28 12 13 6 3 1
Total 7,074 41,275 5,124 38,382 5,256 27,748
Total w/o CERs 6,949 41,226 5,073 38,358 5,254 27,744

North America

Carbon markets in North America suffered a drastic drop in 2016, with almost a 50% reduction both in volumes and in market value.

The WCI market registered a reduction in the volumes of the auctioned allowances by 43%, going from the 340 mt traded in 2015 to 194 mt in 2016. Conversely, the volumes traded on the Rggi market registered a mere 8% reduction with 60 mt traded as against the 65 mt traded in 2015. Also the secondary market registered a significant drop. Based on Reuters estimates, the volume traded reached 144 mt, down by 57% as against 2015. The average value of the fixed-term contract of the California Carbon Allowances (CCA) reached 12.77 $/t (12.0 €/t), almost in line with the 12.76 $/t of 2015. The RGA price, instead, dropped drastically after Donald Trump’s victory, down by 28%. In spite of the values of the CCA, the overall market value diminished considerably due to the marked reduction in the exchanged volumes.

Trump’s electoral victory certainly put a brake on the prospect to expand the US ETS market. On the other hand, Canada has, instead, recently announced that all its provinces will have to put in place an exchange market or fix a Co2 tax by 2018. Mexico will launch a voluntary pilot exchange scheme by the end of 2017, which is expected to become mandatory by 2019.


2016 was a key year for the Chinese carbon market. The seven Chinese exchange market systems (Beijing, Chongqing, Hubei, Guangdong, Tianjin, Shanghai and Shenzhen), which started between 2013 and 2014, have almost all completed their pilot phase. The central Government continues working on the implementation of a national ETS system, which should be activated in 2017. All systems except Chongqing have announced that they will continue operate also in 2016, in view of the national scheme replacing them.

A total of 67 mt emission shares were totally exchanged on the markets in 2016, twice the volumes traded in 2015. The volume of bilateral negotiations has increased 8-fold. This increase in liquidity has been the direct consequence of the introduction of more complex financial products on the markets.

During the year some pilot markets have maintained a surplus in supply, which has caused the decrease of the price of the emission shares. Guangdong was the most liquid market, with over 22 million emission shares traded, making up for about 33% of the total volume exchanged by the seven markets. In spite of the high liquidity, the price of the Guangdong emission shares has been among the lowest because of a surplus in supply on this market, too. Hubei was the second most liquid market, with over 13 million emission shares exchanged. Almost 280 million credits have been exchanged as fixed-time contracts at a price close to 3.2 €/t compared to an annual average negotiation price of 2.5 €/t. This difference is, in our view, to be attributed to aggressive speculative interventions on the Hubei market.

Chinese carbon volumes and values

2014 2015 2016
Mt Million Euros Mt Million Euros Mt Million Euros
allowances Online 13 65 27 96 27 68
Bilateral 3 15 5 19 40 81
auction 13 84 1 5 1 2
offsets 0 0 36 40 46 51
China total 29 165 70 160 113 202

Soure: Reuters