Spot Trading is a smart, technology-focused option trading firm that believes success is more than looking for opportunities. It's about creating them. We understand option pricing and analytics, but also have the experience and infrastructure to maintain a fundamental understanding of the equity markets. We excel at both the art the fundamental analysis and the science the quantitative analysis of trading.
A fundamental influence on the price of EUAs is the cost of energy, particularly the prices of oil, electricity and the 'spread' between coal and gas prices. More demand for power drives up the cost of electricity but also leads to more demand for EUAs to offset higher emissions from fossil fuels burnt to increase that power supply.
The bigger the coal-gas spread gets, the greater the cost to power utilities of converting from coal to gas. Such a switch is the easiest strategy currently available to energy companies for reducing greenhouse emissions - burning gas produces less than half the greenhouse emissions of burning coal.
So the greater the spread, the greater the cost and the less the attractiveness of switching. The less conversion, the more demand there is for EUAs as an alternative to meet emissions reduction targets.
The European Union Emission Trading System (EU ETS) is the largest multi-national, emissions trading scheme in the world, and is a major pillar of EU climate policy. The ETS currently covers more than 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas emissions.
Under the EU ETS, large emitters of carbon dioxide within the EU must monitor and annually report their CO2 emissions, and they are obliged every year to return an amount of emission allowances to the government that is equivalent to their CO2 emissions in that year. In order to neutralize annual irregularities in CO2-emission levels that may occur due to extreme weather events (such as harsh winters or very hot summers), emission allowances for any plant operator subject to the EU ETS are given out for a sequence of several years at once.
Each such sequence of years is called a Trading Period. The 1st EU ETS Trading Period expired in December 2007; it had covered all EU ETS emissions since January 2005. With its termination, the 1st phase EU allowances became invalid. Since January 2008, the 2nd Trading Period is under way which will last until December 2012. Currently, the installations get the allowances for free from the EU member states' governments. Besides receiving this initial allocation on a plant-by-plant basis, an operator may purchase EU allowances from others (installations, traders, and the government.) If an installation has received more free allowances than it needs, it may sell them to anybody
|
