Energy Exchange ICE is set to host new UK carbon emission auctions and futures. The exchange is already offering futures on European Emission Allowances which have been racing past new all-time highs.
Improving energy credentials
The ICE exchange is adding more weight to its credibility in ESG and low carbon credentials. It will host the new UK emission auctions as part of the UK Emissions Trading Scheme (UKETS). The scheme was announced last week by the UK Department for Business, Energy and Industrial Strategy. It said that the new emissions scheme will replace the existing arrangements on January 1, 2021. It is a part of the UK’s effort to move away from its current participation in carbon reduction and trading schemes of the EU.
ICE will not be able to host the auctions and launch its associated future by the time the scheme comes into effect. However, it plans to start hosting the contracts by the second quarter of next year.
European emissions on ICE
ICE already hosts futures on European Emission Allowances (EUA). Each unit of the EUA allows the owner to emit a ton of carbon dioxide or equivalent gases. The European contracts have been trading strongly in the past few weeks and even posted a series of new all-time highs.
A poll published by Montel, a specialist energy markets news site, suggests that analysts are eyeing a price point of €39 for EUA in 2021. The all-time high for the EUA is €32. This is because of a growing interest in carbon trading. The forex and CFD brokers have not been quick to introduce CFD trading on the EUA and other similar contracts on their platform. It is surprising that despite growing interest to embrace ESG themes for savings and investments, the brokers are too slow to react to the market demand.
The UK has one of the most ambitious emission reduction targets in the world. Its carbon emitted in the atmosphere has dropped by 10% in 2021. The government wants to reduce emissions by 68% by the end of the decade.