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The impossible trinity at the heart of net zero
Governments face an impossible trinity if they wish to meet the net zero carbon energy transition - how to balance energy security, affordable energy and environmental sustainability. There have been five energy transitions in the modern age. Each transition involves the transformation of energy sources into economically useful applications as
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Carbon crash: WTF happened?
EU carbon allowances suffered their worst one day decline on Friday, falling 14% at one point late in the day before rebounding slightly to end the day down 12.7%. So what happened, and where do we go from here? First, it’s worth noting that the carbon price has
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To infinity and beyond!
What the non-compliance penalty and a shortage of allowances means for the price of carbon
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The witching hour approaches
The increasing role that options play in the EU carbon market
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The green light from the Golden State
The California carbon market opportunity
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How institutional investment affected the structure of commodity markets, and what it might mean for carbon markets
It’s difficult to imagine today, but at the beginning of the century commodities were not considered a true asset class. That began to change after the publication of a report from two academics, Gary Gorton and K. Geert Rouwenhorst. Their report, ‘Facts And Fantasies About Commodity Futures’ supported the
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How to think about political risk in carbon markets
All commodity markets are political, you just need to understand the game that’s being played. Whether it is oil, sugar or rice or something else, government intervention isn’t too far away. Environmental markets such as carbon are a particular type of political construction in which artificial scarcity is
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The carbon price is an inflation hedge
As the price of carbon rises it will increasingly imbed itself in the economy, becoming an important driver of costs for business, and ultimately prices for consumers. The economy (including all the products and services we consume) currently holds a massive uncovered short position on carbon. Nearly every material good
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German coalition proposals de-risk the path to higher carbon prices
This week, Germany's new coalition government announced a series of climate and energy proposals that will guide their policies over the next four years. Notably, the agreement includes a proposal to “ideally” phase out coal by 2030, eight years earlier than previously committed. In order to achieve this
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The changing fortunes of the EU carbon market
Last week the European Securities and Markets Authority (ESMA) published their preliminary report on the functioning of the EU carbon market. The report was requested by the European Commission in light of high energy prices in Europe, and subsequent questions that had emerged as to the functioning of its carbon
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Getting off zero: Institutional investment likely to give carbon markets the short squeeze
Getting to net zero means getting off zero. As of 2021, institutional investment in carbon markets is very low. That will need to change if the largest investors in the world want to hedge the biggest uncovered short position in their portfolio. Two factors that have limited the level of