Issue CXXXII

The contents of the Newsletter is not a recommendation, either implicit or explicit, to buy or sell emission permits.
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Carbon Newsletter
DBLM Solutions
18 Sep 2014


The EUA Dec14 contract is currently at 5.87.
The last week saw the carbon price drop on the
back of weak European power and technical
selling. The market is attempting to reverse this
trend at the moment if it can break significant
resistance at 6.11.
Analysts have predicted a return to higher volatility
after a sustained period of range bound prices.
Bloomberg notes that the four largest price swings
since 2011 have come directly after political
statements or regulatory changes. With this in
mind, current discussions on the MSR and any
breakthrough announcements may lead to a small
window of opportunity fot EUETS participants to
lower the cost of their carbon mandate. That said, I
foresee any opportunity being very shortlived if the
MSR solution passes smoothly through Europes
bureaucracy.
Weekly
Recap
ICE
EUA
Spot
ICE CER
Spot
ICE
EUA
Dec14
ICE CER
Dec14
11/09/2014 6.09 0.15 6.12 0.14
12/09/2014 5.96 0.15 6.06 0.14
15/09/2014 5.79 0.14 5.82 0.14
16/09/2014 5.79 0.14 5.82 0.14
17/09/2014 5.85 0.14 5.89 0.14
Volumes lots 591 0 95,125 193
Week %

-3.94% -6.66% -3.75% -

CarbonVolatility, an assets price relative to its
average and expressed as a percentage, is about a
fifth of the record reached in April last year when
the 60-day rate soared to 145 percent. The measure
fell to 28 percent on Sept. 3, the lowest since June
2011, ICE data show. It was at 29 percent
yesterday. Even at current levels, Carbon volatility
is currently three times higher than the S & P.
The EUA/CER spread narrowed this week to
5.71, at close of business last night versus the
5.93 spread we witnessed last week and 6.12 the
week before. This weeks spread is on par with the
highest spread over the last two years.
Auctions
EEX held auctions last Thursday, Friday, Monday
& Tuesday Auction prices were 6.06, 5.95,
5.81, & 5.83 respectively. The cover ratios for
the above auctions were 5.18, 7.30, 5.49 & 3.43
respectively. Yesterday ICE sold 2,710,000
EUAAs at 5.20/tonne.
Market Stability Reserve(MSR)
On Sept. 8, the EU Presidency invited comments
on the MSR plan from member states, which have
two weeks to provide input before further talks are
set. As stated before, Germany are looking to have
the MSR operational by 2018 to counteract the 900
million Baclkoaded EUAs, which started in
March. Common sense rules here, if the MSR is
not in place for the latter part of Phase 3, we will
have a flooded carbon market.