EU ETS Reform and MSR Review - An analyst perspective - 23 March 2021

PowerPoint Presentation EU ETS Reform and MSR Review An analyst perspective 23 March 2021 Marcus Ferdinand, Head of European Power & Carbon Market Analytics The EU Climate Law and how it is affecting the EU ETS 2030 ambition ETS vs ESR* emissions Rebasing, early action 55% net reduction Current legislation Rebasing 2030 cap Position represented by 40% of overall 2030 New baseline for LRF, Commissi. [...] increased from 2024) could to continue, 55% net emission reduction ease the transition To be determined once starting and end point are defined target expected burden on EU ETS outcome * ESR = Effort Sharing Regulation, sectors not covered by EU ETS ** Published by the European Commission 2030 headline target TP4 trajectory in September 2020 23 Mar 2021 EU ETS Reform and MSR Review 2 MSR threshold. [...] airline EUA/EUAA demand since 2012 Lower threshold Real lower threshold Source: ICIS 23 Mar 2021 EU ETS Reform and MSR Review 6 Market impact 23 Mar 2021 EU ETS Reform and MSR Review 7 Withdrawal rate has an impact 70 60 ICIS Insight Paper 50 European carbon 40 market to shift gears 30 Featuring 26 scenarios for the MSR review and various cap trajectories. [...] 10 0 2_833_12% 3_833_24% 4_833_18% Source: ICIS 23 Mar 2021 EU ETS Reform and MSR Review 8 EUA price [€/t] The thresholds make the difference 70 60 50 40 600m Lower thresholds cause the 30 MSR being triggered during additional years 20 10 0 24% Could cause the MSR to reach 2_833_12% 3_833_24% 4_833_18% 5_600_24% 6_600_18. [...] UK installations, current scope High 2026 398m 709m 2.0% rebasing Early 722m 2024 198m 722m 3.5% rebasing Early rebasing can have same cumulative effect on TP4 as Early LRF 2024 94m 355m 4.3% high rebasing, but more distributed Source: ICIS * Reduction compared to previous year 23 Mar 2021 EU ETS Reform and MSR Review 11 Rebasing sets the direction (833/400m) 120 100 80 Early 60 Changes to MSR par.