ETS Market:

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Introduction

The European Union Emission Trading System also known as European Union’s Emission Trading Scheme is the largest emissions trading scheme set up mainly to curb adverse climatic changes and reduce the global warming rate.

Countries that are more active in the ETS market are the European Union member states and Iceland, Croatia and Norway. The European Union comprises of 27 member states. However the most active countries are the Netherlands, the Czech Republic, Belgium, France and Spain.

Since 2006, the EUAs have moved significantly to attain a peak of 30Euros per tonne of Carbon dioxide in April 2006, but in May the same year prices fell to under 10 Euros per tonne, the prices further dwindled to 1.2 Euros in March 2007 and declining to 0 Euros in September the same year. On April 2012, the European Commission initiated the full activation of 30,000 accounts. The current prices of an EUA based on the closing prices of 2012 are 6.67 Euros per tonne (Ellerman, 2010)

The countries that supplied more carbon credits over the period from 2006 to present are Ukraine, Russia and the United Nations.

It has been evidently noted that the EUA prices exceed the CER prices. This is due to the changes in structural relationships and also the different market frameworks used by the two. Other causes of the spread are a lack of market competition and changes in the regulatory system pertaining the EUAs and CERs. The uncertainty that revolves around the CERs also plays a major role as far as the spread is concerned.

Reference

Ellerman, A. D., Convery, F. J., & Perthuis, C. d. (2010). Pricing carbon: the European Union Emissions Trading Scheme. Cambridge, U.K.: Cambridge University Press.