Transcript Trading of EU-allowances at Nord Pool

APEx 2005 Annual Conference
Disney’s BoardWalk Inn, Florida
CO 2
Torger Lien
President & CEO, Nord Pool ASA
Kyoto protokoll
ETS and EUA quota system
EUs Kyoto obligation
Diff. reductions
Kyoto gap
ETS
ETSReductions
reductions
ETS sectorer
Carbon credits
CERs (CDM)
ERUs (JI)
Other
Emissions 1990
Emissions 2008-2012
Ways to close the Kyoto gap
Non-ETS
measures
(domestic)
Own abatement
Governments decide
how to share the
burden. Ultimately
Kyoto commitment
rests with
governments
Domestic policies & measures:
•
•
•
•
•
Taxes
Financial support
“command-and-control”
Negotiated agreements
Own abatement
ETS
Imports:
Residual:
Government
purchases
• EU allowances (EUAs)
• Credits from developing countries (CERs)
• Credits from Russia/Ukraine ((ERUs)
•“ Kyoto units” – Assigned amount units
Allocation to individual
installations
Kyoto AAUs (assigned amount units)
Husholdninger,
Tjenesteyting,
Mindre industri
ETS
Transport
Trinn 1
Trinn 2
Metall
Kraft
Varme
Mineraler
Treforedling
Trinn 3
Instal. 1
Instal. 2
Instal. 3
Instal. 4
Trinn 4
“Gap” ETS sector 2005-2007
BaU EU 25
Mil ton
CO2
60
EU 1O (New)
50
CDM
40
Weather
30
EU 15
20
10
Reductions
ETS sector
Economical
growth
Energy prices
“Gap” ETS sector 2008-2012
Import of
credits
250
200
150
Import of credits:CDM/JI or
ETS-sector reductions
EU 25
100
50
Reductions
ETS sector
Demand
Supply
Competition over CDM/JI
credits: Public fund, buyers
outside Europe
Marginalcost powergeneration
-Continental Europe
Carbon price
€16/ton
Carbon price
€16/ton
Coalprice
Gas price
$64/ton
$5.75/mmbtu
Coal
Gas
Coalprice, gasprice & carbonprice
Carbon price (€/tonn)
30
25
20
15
10
5
Gasprice/Coalprice
E Continent
May 2004
E Continent
May 2005
UK
May 2005
2 0 0 5 -0 5 -2 5
2 0 0 5 -0 5 -1 8
2 0 0 5 -0 5 -1 1
2 0 0 5 -0 5 -0 4
2 0 0 5 -0 4 -2 7
2 0 0 5 -0 4 -2 0
2 0 0 5 -0 4 -1 3
2 0 0 5 -0 4 -0 6
2 0 0 5 -0 3 -3 0
2 0 0 5 -0 3 -2 3
2 0 0 5 -0 3 -1 6
2 0 0 5 -0 3 -0 9
2 0 0 5 -0 3 -0 2
2 0 0 5 -0 2 -2 3
32
2 0 0 5 -0 2 -1 6
2 0 0 5 -0 2 -0 9
€ /M W h
Fuelcost, gas & coal
D e v e lo p m e n t in fu e l c o s ts fo r c o a l a n d g a s
34
F u e l c o s t g a s e ffic ie n c y 4 9 %
F u e l c o s t c o a l e ffic ie n c y 4 7 %
30
28
26
24
22
20
Trading EU Allowances
at Nord Pool
To start
in 2005
Forward contracts – physical delivered
•
•
•
•
Ticker code: EUA (1 EUA = 1 tCO2)
Min. lot: 1000 EUA
Starting with three contracts:
• EUADEC-05 (last trading day 1st Thursday in December 2005)
• EUADEC-06 (last trading day 1st Thursday in December 2006)
• EUADEC-07 (last trading day 1st Thursday in December 2007)
Closing price set every day
Use existing infrastructure; PowerCLICK ETS, Clearing Desk
Application, SECUR clearing system etc
Link to national registries for transition of EUA
EUA spot contract
EUR/ tCO2
EUA Prices
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
31.01.05
EUADEC-05
Prices: CFI-DEC05
28.02.0
31.03.05
30.04.0
31.05.05
30.06.0
31.07.05
31.08.05
30.09.0
Open interst
Volumes compared
NP: 10249
ECX: 13174
Volum Nord Pool vs ECX & EEX
1200
24.500
24.000
23.500
23.000
22.500
22.000
21.500
21.000
20.500
20.000
19.500
19.000
18.500
18.000
17.500
17.000
16.500
16.000
15.500
15.000
14.500
14.000
13.500
13.000
12.500
12.000
11.500
11.000
10.500
10.000
9.500
9.000
8.500
8.000
7.500
7.000
6.500
6.000
5.500
5.000
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
500
0
ECX ex EFP
NP ex otc
EEX
NP ex otc
EEX
ECX ex EFP
1100
1000
900
800
1000 tCO2
700
600
500
400
300
200
100
0
2.11.05
2.25.05
3.11.05
Source: NP, EEX, IPE
3.25.05
4.8.05
4.22.05
5.6.05
5.20.05
6.3.05
6.17.05
7.1.05
7.15.05
7.29.05
8.12.05
8.26.05
9.9.05
9.23.05
10.7.05
Carbon dioxide price impact on
electricity prices
100%
Elastic consumption
Load variation and price structure
Fuel exchange
Hydropower
Bottlenecks
0%
No thermal power
Production cost avg. coal
fired power generation
Marginal carboncost:
13,7 øre/kWh
35
30
20
15
K a rb o nko stna d
10
B re nse ls ko stna d
5
OP E X
U ke
23
21
19
17
15
13
11
9
7
5
3
1
52
50
48
46
0
44
ø re /k W h
25
CO2 cost impact –
the European model
Definition:
Price rise/cost
escalation for
coal
100 %
80 %
60 %
40 %
Nordel
Germany
20 %
0%
10
20
30
40
50
60
EUR/tonne
Today’s fuel prices
The cost effect in Germany is higher than in the Nordic
region
Today’s carbon dixoide price yield about 45% effect in
the Nordic region
Actual forward and carbon
dioxide prices, 2007
35
45
43
30
41
39
37
20
35
15
33
31
10
29
5
27
0
February 05 March 05
25
April 05
Carbon
May 05
June 05
2007 Germany
July 05
August 05
2007 Nordel
Strong correlation beetween forward and carbon dioxide prices
•
Even stronger correlation between Nord Pool and EEX power prices
EUR/MWh
EUR/tonne
25
EUA/ETS sustainability
Higher power prices to household consumers
Globally competitive base industry will suffer
EUA price formation fundamental or speculative
Will the consept reduce CO2 emissions globally
2005-2007 is the test period. What will be the
conditions for 2008-2012 period, and what will happen
after 2012
For how long will European poleticians be the frontiers
on the account of european base industry flagging
out…or will the rest of the world follow their brave
initiative?
For more information:
www.nordpool.com