Lower supply on the carbon emission market next year

The European market for carbon emissions will see a lower supply of quotas during the coming years, as a part of the EU market reform.

The European market for carbon emissions has for years had the problem, that an enormous amount of unused quotas are flooding the market. This is partly quotas, that were bought ahead of the financial crisis, and that were left unused because of the falling production that Europe experienced due to the crisis. The total amount of unused quotas on the market is according to the EU as high as 1.65 billion.

The EU has however started to take action against the enormous surplus of quotas, and the primary initiative to help re-create some sort of balance on the market is the so called MSR Reform, which is meant to cut the surplus of quotas. Tuesday, the European Commission announced, that they during 2019 sell 265 million fewer quotas on their quota auctions.

According to the European Commission, it will continue to lower supply until the amount of quotas flooding the market is down to “only” 400 million. This will most likely take some years, and the EU has not hesitated to say, that the work on stabilizing the market will be a long-lasting process.

The news about the 265 million fewer quotas put up for sale next year was received with some relieve on the European market for carbon emissions, which had feared an even bigger withdrawal. This was seen during the day, where the price on a quota fell by 0.32 EUR/t to 14.32 EUR/t. Wednesday morning, the market does however bounce back a bit.