In the first quarter of 2023, revenues generated by trading in European emission allowances (EUA) amounted to EUR 311 million or 49% higher than for the same period of 2022, as indicated by EEX data. To date, this is the largest value for that period of the year.
Particularly strong were February and March, when revenues exceeded EUR 100 million. In March they amounted to EUR 114.7 million or at a monthly value coming second after the impressive EUR 131.5 million achieved in May 2022.
These higher revenues resulted from bigger quantity of emission allowances allocated to Bulgaria compared to the previous year and the high allowance prices in the first months of the year.
According to EEX calendar, 2023 emission allowances applicable to Bulgaria amount to 15 675 000. This quantity may be adjusted following EC decision on quantity of allowances considered under the Market Stability Reserve for September 2023 – August 2023, to be announced in May 2023. The reason for emission allowance increase has to do with last year’s Government decision to auction 2021 and 2022 allowances allocated under the so-called derogation (free allocation of allowances against investments with the purpose of modernisation under Article 10c of Directive 2003/87/EC).
National revenues from EUA trading in 1Q 2023, euro
Within this period, it is common to witness higher allowance prices due to higher demand.
According EU ETS rules, enterprises covered by the emission trading system have to verify and report independently their previous calendar year emissions by the end of March and submit EUA reports to EU by the end of April.
Usually, this schedule invokes enhanced activity for allowance purchase in the first quarter of the year. Trade volumes in various segments (including spot and futures) increase because industrial enterprises finalise their emission reports and purchase all remaining EU allowances they need.
Emission allowances were traded at prices achieved at joined auctions and fell within the range of EUR 75. 04/t CO2 to EUR 96.33/t CO2, with close to 40% of the emissions auctioned at over EUR 90/t CO2.
Average auction price for February was EUR 92.14.t CO2 or the highest since EU ETS third and fourth phase had become operational.
Average auction price for January-March 2023 was EUR 87.10/t CO2 or 5.6% higher than the price reached in the same period of 2022.
Average auction prices of EUA, euro/t.CO2
Context
Bulgaria
Revenues from emission allowance trading – an important element in EWRC pricing policy
EUA revenues are an essential tool to stimulate low-carbon development in Bulgaria. 100% (up to June 2016 – 77%) of revenues gained from auctioning all greenhouse gas emission allowances allocated to Republic of Bulgaria are fed into the Energy System Security Fund and are used to reduce the price of obligation to society charge. The total amount of such revenues for the new regulatory/pricing period (Decision No Ц-19 dated 01 July 2022) was projected to be BGN 2 436 415 000. The Regulator took into account the net allowances of greenhouse gas emissions to be realised by Bulgaria according to European Energy Exchange calendar and predicted a price of EUR 85/t CO2 starting from 01 July 2022, with a gradual increase to EUR 99.00/t CO2 by 30 June 2023. The first nine month of the period showed EUA revenues of BGN 1.66 billion or 68% of the forecast.
