Green Markets

EWN Publishing

Unusual nature of mandated green markets clearly depicted in current NGAC behaviour

Posted by gmarkets on 3 September, 2007

A downward trend in greenhouse abatement certificates was explained by the fact that buyers who had until March 2008 to cover their 2007 obligations could watch prices move in their favour as the current stock oversupply and uncertain future for NGAC transition to NETS dominated thinking, said The Green Room (Edition 117). Greenhouse Abatement Certificates: “In a scenario familiar to many markets, it was a case of when it rains it pours in the NGAC realm last week,” the website reported. “No trades were reported before or after Wednesday, but the colloquial `hump day’ itself was busy. The session teed off with a 25K parcel of Cal09s at $10.60, a full $0.90c below the last recorded trade of that vintage. In itself it provided an example of how much the market had moved over the 10 day period between Cal09 trades. The Cal09 price inferred an (approx) $8.95 spot price which was also down on the previous spot trade. A 25K parcel of the Cal10s then changed hands at $11.40 which was roughly consistent along the forward curve with the $8.95 base. From there on it was the spots that received all the attention and the price trend: downward. A standard market parcel went through at $8.80, followed by another at $8.70 which must have produced ‘that sinking feeling’ for some participants. There was a brief glimmer of hope for sellers though as a 25K parcel, followed by a 21K parcel both went through at $8.75.”

Market behaviour explained: “The unusual nature of the mandated green markets is clearly depicted in current NGAC behaviour,” the report said. “Unlike many other markets, GGAS and MRET have natural sellers, mandated buyers and traders. Hence the market has a specified demand, rigorous but not impassable barriers to supply entry and a regulator who is prepared to tweak the rules of engagement. These unique characteristics mean that, in the case of NGACs at the moment, when natural sellers come to the market needing to sell, buyers who have until March 2008 to cover their 2007 obligations have been able to watch prices move in their favour as the current stock oversupply and uncertain future for NGAC transition to NETS dominate thinking.”

Renewable Energy Certificates: “In the REC market last week things quietened again after the previous week’s liveliness,” said the report. “Interestingly, the only activity took place on the same day that things were bustling in the NGAC market. There must have been something in the air on Wednesday! Trading kicked off with a sub market parcel going through at $31.00. This was followed shortly after by a 10K deal at $31.30 which meant that the spot REC market continues to trade in the $31s for the 6th consecutive week.”

Environmental Entitlements & VRECs: “Last week in the GEC market the level of both bids and offers shifted slightly downward, the prior by more than the latter,” said the report. “However, despite this movement no trades were reported to the market. In the Greenhouse Friendly market, no trades were reported yet the signs for the future remain positive. Recently, at a forum on emissions trading held in Melbourne a senior member of the PM’s NETS Task Group reiterated the importance of the ‘additionality’ requirement which GF credits have in relation to the future national scheme which is currently being formulated in Canberra. Over in Europe, Dec ’08 allowances softened gradually over the week and dropped 1 per cent on Friday to close at €18.60, only marginally above a 4-month low. From the green to the white and the alpine weather this weekend was mild and the snow cover ripe for carving.”

Reference: The Green Room, Edition 117 – 27 August 2007. The Nextgen Green Team – Ken Edwards, Fernando Broder and Marco Stella. Website:

Erisk Net, 30/8/2007


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