Wireline Magazine Issue 51 - Summer 2021

52

50

48

46

44

UK Allowance Futures Price (£/tonne)

42

40

19 May 2021

26 May 2021

02 June 2021

09 June 2021

16 June 2021

23 June 2021

Source: ICE

Some of the anticipated tightening may already be priced into the market, and according to OGUK energy policy manager Will Webster: “Certificates can be banked across years so there’s a bit of a forward look,” he noted, “But emitters must also balance the books at the year-end for compliance.” Price stability The small UK market is making some emitters nervous given the limited supply, and the launch was made more problematic due to the recent upside price volatility on the EU ETS. Brabben cautioned that there could be problems given the smaller size of the UK market: “It's still early days here, the UK market is potentially expected to be more volatile because of its relative size to EU ETS. For instance, one large [combined cycle gas turbine] CCGT going offline and not requiring permits has a proportionally larger impact on the standalone UK scheme.” A positive sign is that several leading non-energy participants are also now involved with the UK market, which is helping provide the liquidity that it needs to operate effectively, according to Webster. “Traders in the market provide liquidity and should help with price discovery,” he added, though agreed there was still some concern over liquidity, which could, for example, be a problem at the end of the compliance year. To address these concerns, the UK government has indicated it would like a linkwith the EUETS, which it sees

“In the short-term there's likely to be some correlation design of the UK ETS being very close to the EU scheme.” due to the purposeful

Left: UK ETS futures, May-June 2021.

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