Q&A: With Current European ETS levels, what is the risk of political intervention?
There is constant political pressure from some part of these markets. The European Commission and the other programs have been steadfast in maintaining the course. Each program has also laid out guidelines for when tightening pauses or easing is introduced. For example, RGGI injected liquidity when they hit their upper band at year end. Europe’s stability reserve will stop buying at a TNAC (total number of allowances in circulation) of 800mm allowances and sell 100mm allowances if the TNAC falls below 400mm. We’re at about 1.5bn TNAC today and the market is pricing all of these known factors. Europe also introduced a trigger to ease if the EUA price ever becomes x3 the 6 month average. Note that not even Europe’s price is close to being impactful enough to emissions, back peddling here would undermine the process.