Carbon Price Direction: More Affected By Systemic Issues

Recently the market is moving higher due to other parts of the energy complex. The market is not rushing ahead in carbon however, as it can be seen to do in Oil. I am not so bullish on carbon as some are, to say for example that it will get to 35 or 40 in EUAs (which admittedly a lot of dealer surveys predict).

I think rather, that the systemic and policy issues of the UNFCCC and the European Commission will be the most confusing aspect, even if the price direction of energy seems clear. The issue of whether CERs and ERUs will be valid credits in the EU ETS after 2012 is a big issue and the EC does not want to import them if no one else in the world is going to participate willingly and actively in carbon trading. This makes sense, really. But it is a bit naive to think they will sign up to it easily.