MARKETS AND FINANCE PELLETS &63.8It/PWFNCFS0DUPCFS EUR ! %! % $! $ #! # Pix Pellet Nordic CIF Note: PIX Pellet Nordic CIF focuses on industrial pellets use in the Nordic and Baltic Sea region. The index is based on the previous month’s data and published the 3rd Tuesday of every month at 12 noon GMT+2. For price conversion between price per ton and price per MWh, a coefficient of 4.8 is used, if not otherwise informed by the price provider. The PIX indexes are trade mark registered, worldwide, by FOEX Indexes Ltd. Using the PIX indexes commercially is subject to approval by FOEX Indexes Ltd, the owner of the PIX index trademark. 4400 BBiiooeenneerrggyy IInntteerrnnaattiioonnaall NNoo 8822,, 66--22001155 Carbon Car pricing, With the countd conference, the Trends of Carbon ing momentum t sions covered by the last decade t countdown on to the Paris, France climate change new World Bank/Ecofys report ”State and Carbon Pricing 2015” shows clear evidence of growing to put a price on carbon. The share of emissions by carbon pricing has increased threefold over to cover 12 percent of global emissions. The growth of carbon pricing around the world has been substantial. Currently, about 40 national jurisdictions and over 20 cities, states, and representing almost a quarter of global greenhouse gas (GHG) putting a price on carbon (Figure 1). Together, carbon cover about half of the emissions in these jurisdictions, which translates to about 7 gigatons of carbon dioxide equivalent (GtCO2e) or about 12 percent of global emissions. China and US largest volumes To date, China and the United States are the two countries with the largest volume of emissions covered by carbon pricing instruments. In China carbon pricing instruments cover 1 GtCO2e, while in the United States they cover 0.5 GtCO2e. China has announced its intention to move to a national emissions trading system (ETS). It currently has seven pilot ETSs, which combined form the largest national carbon pricing initiative in the world in terms of volume. The European Union Emissions Trading System (EU ETS), which covers 2 GtCO2e of emissions, remains the single largest international carbon pricing instrument. So far this year, the Republic of Korea launched an ETS, and California and Québec’s cap-and-trade programs expanded their GHG emissions coverage from about 35 to 85 percent by including transport fuel. Also, Ontario announced its intention to implement an ETS linked to California and Québec’s programs. A major structural reform in the EU ETS was approved for implementation starting in 2019, and a proposal to revise the EU ETS after 2020 has been put forward. These changes should make the EU ETS more resilient to sudden changes in macroeconomic conditions and help ensure that the EU ETS enables cost-effective emission reductions in the decade to come. The advances in 2015 follow on the heels of 2014 milestones such as the implementation of two new subnational ETSs in Hubei and Chongqing (both Chinese jurisdictions), the implementation of carbon taxes in France and Mexico, and the adoption of new tax legislation in Chile. The year has also seen more companies using an internal price on carbon. Worth US$50 billion The combined value of the regional, national, and subnational carbon pricing instruments in 2015 is estimated at just under US$50 billion globally, of which almost 70 percent (about US$34 billion) is attributed to ETSs and the remainder (about 30 percent) to carbon taxes. The existing carbon prices vary significantly—from less than US$1 per tCO2e to US$130 per tCO2e (see Figure 3). The majority of emissions (85 percent) are priced at less than US$10 per tCO2e, which is considerably lower than the price that economic models have estimated is needed to meet the 2°C climate stabilization goal recommended by scientists. Carbon pricing is increasingly being used internally by firms as a tool to analyze business and investment strategy. Some of these carbon prices are substantially higher than current price levels in mandatory carbon pricing instruments. Internal carbon pricing is part of a risk management strategy to evaluate the current or potential impact of a mandated carbon price on business operations. It is also used as a means to identify and value cost savings and revenue opportunities in low- carbon investments. In a world of fragmented carbon pricing instruments, the potential impact of carbon pricing on the international competitiveness of some domestic industrial sectors There has been a growing interest in pellets in Finland, especially after Helsingin Energia’s example to start co-firing pellets, according to Vapo, the current provider of pellets for Helsingin Energia. There is enough growth reserve in Finnish pellet production capacity to meet this growing demand, and e.g. Vapo’s plant in Ilomantsi can still increase its production by 50% if demand goes up. According to Hawkins Wright Forest Energy Monitor, there is an oversupply in industrial spot pellets, hence the prices of industrial pellets in ARA area have continued to come down. This is, however, expected to be only short term. E.g., Drax’s unit 2 had a lengthened maintenance time which affected the supply/demand balance. On the residential side in Central Europe, the pellet prices have been rather stable. The wood pellet imports to Europe (EU28) from outside the EU area totaled 3.139 million tons in the first half of 2015, up by 7% compared to the same time period last year. The main trade flow was again imports from the USA to the UK, representing almost 50% of the total European imports from the non-EU sources. Canada and Russia accounted for 21% and 12%, respectively, of the total imports to Europe. Globally, the wood pellet market is expected to keep growing. One estimate is an annual growth of over 14% by the year 2023. At the start of the heating season, the September temperatures were generally higher than on average in the Nordics. Changes in price quotes reported to the PIX Pellet Nordic Index were mixed but with an upward majority. The Euro value dropped against the Swedish Crown in September by 1.3%, compared to the August 2015 average. This meant some upward pressure to the Euro-value and the opposite to the SEK-value. After removing the highest and lowest 10% of the price quotes, the PIX Pellet Nordic index value increased in Euro-terms by 0.50 euros, or by 1.79%, ending at 28.51 EUR/MWh. The value increased also in Swedish Crowns, by 1.25 crowns, or by 0.47%, and closed at 267.78 SEK/MWh. 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Bioenergy no 6 October 2015
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