Environmental Engineering Reference
In-Depth Information
Figure 7. Price curves between April 05 and February 10 of ECX EUA futures with annual maturities
from December 2005 to December 2012
25
Prices and Returns
08 and DEC 09 maturities peaked just above 30€
towards the end of April 2006. Although there
was early suspicion of over-allocation, the market
got caught by surprise by the simultaneous infor-
mation revelation by a number of EU Member
States of lower than expected 2005 emissions.
Prices across outstanding maturities fell by about
54% in four days. First and second period contracts
still moved in tandem, but the DEC 06 and DEC
07 contracts were hit harder since being subject
to delivery in the pilot phase. By October 2006
prices had recovered and got almost aligned across
outstanding maturities in the range from 15€ to
20€. However, DEC 06 and DEC 07 continued
to trade at a small but observable discount com-
pared to contracts with maturities in the second
compliance period from 2008-2012.
The next incidence when institutional interfer-
ence hit the market was in October 2006. Firstly,
EU Member States finally confirmed that there
would be no banking of EUA from the first to
From the very beginning there has been active
futures trading under the EU ETS. As highlighted
above futures volumes and liquidity continue to
be far ahead of spot markets. There is early de-
mand for long-term hedging strategies across the
energy markets far before the actual start of the
compliance period. As the price curves in Figure
7 show, futures trading in the respective contracts
starts far before the actual issuance and trading
in the underlying EUA. In he following we use
data from the ECX, the most liquid futures market
under the EU ETS.
Observing the price curves in Figure 7 there
are some noticeable adverse patterns. The EUA
price experienced strong price changes in the
pilot phase 2005-2007. After fluctuating heavily
in the range between 20 and 30€ from mid 2005
to March 2006, prices for the DEC 06 and DEC
07 maturities as well as the already traded DEC
