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Speaker 1: Hi, I'm Dana Perkins and you're listening to Switched on

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Speaker 1: the b n e F podcast. Today Mark Taylor and

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Speaker 1: I speak with Jan Olsen, who's the head of European

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Speaker 1: Carbon Research. We talked to Jan about the EU Emissions

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Speaker 1: Trading System or EU e t S and his most

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Speaker 1: recent market outlook, where he tells us how and when

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Speaker 1: carbon prices are likely to go over one hundred euros

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Speaker 1: per metric ton from the under fifty euro price they

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Speaker 1: are today. We've not done a podcast about the EU

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Speaker 1: e t S or the u K e t S

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Speaker 1: for that matter, so this is going to serve as

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Speaker 1: a bit of a primer. We're going to define a

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Speaker 1: few things, explain how these markets work, and in other words,

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Speaker 1: if you are a carbon trader, you likely already know

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Speaker 1: this stuff, but for the rest of us, it's important

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Speaker 1: we understand this unique mechanism for driving decarbonization. For those

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Speaker 1: who want to know more, check out the one EU

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Speaker 1: e t S market outlook or our primer on the

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Speaker 1: UK Emissions Trading System. These can be found on the

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Speaker 1: Bloomberg terminal at b NF Go or on BNF dot

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Speaker 1: com or a mobile app. As a reminder, b and

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Speaker 1: F does not provide investment of strategy advit. So we've

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Speaker 1: got the full benef disclaimer at the end of the show.

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Speaker 1: And now let's get started by speaking with Johan Olsen

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Speaker 1: about the EU e t S. Jan thanks for joining

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Speaker 1: us today. We are here to talk about the EU

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Speaker 1: Emissions Trading scheme and what looks like will be a

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Speaker 1: rocket ship sort of price increases over the next couple

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Speaker 1: of years. So let's start. Will you first explain to

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Speaker 1: all of us what the EU e t S is.

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Speaker 1: Absolutely first, just let me say thank you for inviting

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Speaker 1: me here. It's a pleasure to be here. Now, the

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Speaker 1: EU e t S is a cup and trade emission

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Speaker 1: market and us a name might suggest, coup and trate

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Speaker 1: us two parts to it. The first part is is

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Speaker 1: the cup in this case the use of the cap

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Speaker 1: on the maximum amount of emissions that can be omitted

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Speaker 1: by European industry dot cup will decline every year. The

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Speaker 1: EU done distribute allowances either by auctions or they hand

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Speaker 1: them out for free. Too hard to upbate industries. And

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Speaker 1: you need one allowance for each ton of CEO to

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Speaker 1: you emit, So an allowance is an European emissions allowance.

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Speaker 1: The capticizes how many emissions allowances are supplied every year

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Speaker 1: to the market. And the second part of the system

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Speaker 1: is trade. Now companies, after they've got their initial allocation

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Speaker 1: and auctions have taken place, companies can freely trade allowances

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Speaker 1: between each other. And the idea is that companies with

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Speaker 1: the expensive options to reduce emissions can buy allowances from

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Speaker 1: companies with cheaper form of emission reductions available to them,

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Speaker 1: and that way you have a market based mechanisms that

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Speaker 1: hopefully will drive the cheapest form of emission reductions in

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Speaker 1: the system as a hope. So these EU ways, which

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Speaker 1: is what the cool kids call them, are looking to

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Speaker 1: drive down emissions. Now how much are they looking to

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Speaker 1: reduce emissions by and what year kind of what's the

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Speaker 1: objective here? So that's a little bit unclear right now.

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Speaker 1: The system is set up for the EU emissions target

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Speaker 1: by which is a thought for target by twenty thirty

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Speaker 1: and the U T S sectors will then have to

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Speaker 1: reduce emissions by forty three percent compared to two thousand

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Speaker 1: and five levels. Now we know the European Green Deal

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Speaker 1: is taking place and that the updated emissions target for

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Speaker 1: for the EU as a whole will be fifty by

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Speaker 1: twenty thirty instead of the four percent that it currently is.

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Speaker 1: It is not yet clear how that will impact EU

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Speaker 1: d S sectors. Because the S sectors only covers about,

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Speaker 1: let's say, just under half of emissions in the EU,

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Speaker 1: we expect U d S sectors to have to carry

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Speaker 1: more of the burden of this additional ambition. So when

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Speaker 1: we run our models, we say that the cup for

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Speaker 1: e U D U d S or the emissions targets

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Speaker 1: will be a sixty three reduction in emissions compared to

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Speaker 1: two thousand and five levels, and then the rest of

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Speaker 1: the burden will have to carded by non e T

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Speaker 1: S sectors such as transport or agriculture. Who's covered right now?

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Speaker 1: Can you describe some of the EU E T S sectors?

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Speaker 1: So it's essentially all heavy manufacturing industry, so things like cement, steel, aluminium,

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Speaker 1: petrochemicals and that kind of thing. And in addition, power

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Speaker 1: generations and intra regional aviation is covered, you know, and

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Speaker 1: I understand how the policymakers fit into this. You know,

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Speaker 1: they're trying to reduce carbon emissions in the EU and

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Speaker 1: understand how the covered sectors play in as well. You know,

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Speaker 1: they're on the hook for reducing their emissions or you know,

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Speaker 1: buying credits or excuse me, eu A S to cover

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Speaker 1: those emissions. But how does the financial sector work under

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Speaker 1: the eu T S. It's different. Well, different financial actors

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Speaker 1: act differently in the market for obvious reasons. First, I

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Speaker 1: would say that most trading within the cover market happens

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Speaker 1: within derivatives, so that these futures or options. Financial institutions

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Speaker 1: like how UCH funds, banks, day traders, whatever it may be,

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Speaker 1: have can trade these derivatives on exchanges like ICE or

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Speaker 1: e X. And there are a lot of smart people

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Speaker 1: within the financial sectors, particularly if you think about energy trading.

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Speaker 1: Tusks are really active within the carbon market, and what

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Speaker 1: they will do depends on what kind of time horizon

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Speaker 1: they operate in. So you have anything from day traders

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Speaker 1: who just look at their little latility that might even

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Speaker 1: just look at technicals rather than the technical analysis rather

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Speaker 1: than fundamental analysis in an attempt to you know, buy

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Speaker 1: the dip and sell the top, as it were. You

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Speaker 1: don't have institutions with longer horizon maybe a year, maybe

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Speaker 1: two years, who have a fundamental view and where they

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Speaker 1: think the price will move in general over the next

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Speaker 1: year or so. And finally you might have institutional investors

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Speaker 1: who will buy some EUA s or futures and look them,

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Speaker 1: put them in a cupboard. They put them in a

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Speaker 1: cupboard for four to five years and then see where

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Speaker 1: the prices and when that time comes. Traders are much

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Speaker 1: maligned in the market. So lately we've heard that there's

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Speaker 1: been a lot of traders entering the market, particularly investment funds,

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Speaker 1: and that has brought a lot of extra demand, which

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Speaker 1: has driven the price up, maybe higher than some people

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Speaker 1: have predicted. So it drives the price up but also

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Speaker 1: potentially makes it harder for companies that are you know,

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Speaker 1: the coverage sectors to get their hands on euays. Is

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Speaker 1: that right, Yeah, that's's exactly correct. It is a fair

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Speaker 1: point in a way that these financial investors are pushing

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Speaker 1: the price up, but you have to remember that they

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Speaker 1: also play a really important role as market makers and

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Speaker 1: enhancing liquidity on the market. So so price formation becomes

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Speaker 1: becomes better, and we have a let's say, a live

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Speaker 1: market rather than a market with trades you know, every

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Speaker 1: thirty minutes or so, so you know, they they're all

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Speaker 1: that they play you could criticize it for or distorting

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Speaker 1: the market, but at the same time it is important

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Speaker 1: to have them there. It would seem that the policymakers

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Speaker 1: would love it that they would drive up the price

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Speaker 1: and make it harder to get the EU A S

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Speaker 1: and therefore force well at least in encourage emitters to

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Speaker 1: find other ways to reduce emissions. Well, if your end

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Speaker 1: goal is emissions, but of course you could just put

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Speaker 1: the cap down. Policy makers do support financial activity within

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Speaker 1: the market. That being said, there are talks around holding

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Speaker 1: limits for financial institutions as we have more and more

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Speaker 1: funds joining and it could actually look like financials will

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Speaker 1: become the dominant actor within the market. So there's a

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Speaker 1: balance there and and you also have to think about

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Speaker 1: the political side. But in the EU it is clear

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Speaker 1: to to people in the European Commission and the European

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Speaker 1: Parliament that we will need a much higher carbon price

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Speaker 1: by the end of the de kid for you to

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Speaker 1: reach its ambitious emission reduction targets. That being said, it's

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Speaker 1: not just about you know, knowing that we have to

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Speaker 1: get to a certain level. It is also about how

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Speaker 1: fast we get. If you say a hundred and ten

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Speaker 1: europer ton carbon price in thirties politically acceptable. That might

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Speaker 1: not be the case for a hundred and ten euros

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Speaker 1: per ton this year. So yes, the Eupean Commissioners or

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Speaker 1: the the EU is happy for the financials to play

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Speaker 1: in this market and to provide this extra liquidity, but

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Speaker 1: there's also a limit to how how the price can

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Speaker 1: go before we'll get a lot of lobbying from industrial

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Speaker 1: interest groups or EU member states that might not necessarily

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Speaker 1: support the carbon market as much as Western countries do.

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Speaker 1: So let's talk about that price and what is it

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Speaker 1: as of recording today? What is the price right now?

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Speaker 1: The last time I checked it was something along the

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Speaker 1: lines of fifty one euros per ton. We've had an

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Speaker 1: all time high earlier fifty six euros per ton, So

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Speaker 1: that is quite a dramatic increase from the twenty to

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Speaker 1: thirty weeks so last year and certainly the five euros

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Speaker 1: in tw seventeen. And you know that's yeah, that that's

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Speaker 1: been driven by reform within the Euse of the EUTS

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Speaker 1: has been reformed several times over the last few years,

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Speaker 1: and that's striving the price of well. And you do

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Speaker 1: this market outlook periodically where you look at what the

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Speaker 1: price could be in the future, and you have a

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Speaker 1: pretty good view on when you think we could reach

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Speaker 1: a hundred euros per time? So when is that? And

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Speaker 1: you know why has that timeline looked like it's gotten

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Speaker 1: so much shorter. The main reason why the timeline has

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Speaker 1: got so much shorter is this updated emission reduction target

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Speaker 1: for twenty thirties. That will mean a a reformed that

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Speaker 1: would have to literal reform of the U T S

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Speaker 1: that will tighten the cap going into we can generally

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Speaker 1: split our forecast down in into three periods at the moment,

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Speaker 1: so the next few years, we still think fuel switching

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Speaker 1: will be the dominant so of emission reductions, and to

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Speaker 1: have sufficient field switching take place, we'll need a current

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Speaker 1: price around where we are now, so anywhere between the

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Speaker 1: fourties and sixties really, Then as we moved to the

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Speaker 1: mid twenties, field switching will no longer be enough, and

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Speaker 1: also there won't be as much field switching available as

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Speaker 1: called plants close down, and that will lead to a

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Speaker 1: period where renewables will dominate the emission reduction sort of picture.

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Speaker 1: If you will renewables, I mean renewables that are on

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Speaker 1: top of national targets, so we know there's going to

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Speaker 1: be a lot of renewable auctions taking place in different

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Speaker 1: EU member states. Well, we think also think that we're

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Speaker 1: going to need some much and renewable so that is

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Speaker 1: renewables that are only supported by a power purchase agreement

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Speaker 1: or just placed on the spot market itself. And then

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Speaker 1: as we get pasted towards the end of the decade,

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Speaker 1: we're going to need to see industrial decorbanization and that's

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Speaker 1: think we've never really seen in the e U t

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Speaker 1: S or really any industrial sectors. So it is unclear

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Speaker 1: how that will play out. But the two most likely

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Speaker 1: technologies that will be used as we see it now

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Speaker 1: is either hydrogen or CCS or a mixture of the two.

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Speaker 1: And to make those technologies competitive against the more traditional

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Speaker 1: methodologies of manufacturing steel, cement and that kind of thing,

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Speaker 1: you're going to need a price around a hundred years

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Speaker 1: per ton, and that is how we get to our

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Speaker 1: forecast of above eight euros per ton by and it's

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Speaker 1: just going to be gradual or do you think we're

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Speaker 1: going to see a lot of volatility between now and then?

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Speaker 1: We are going to see volatility. The ut is is

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Speaker 1: a volatile market by its very nature. If you look

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Speaker 1: at other energy commodities and compared volatility to carbon, then

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Speaker 1: then carbon is is always higher. And and that is

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Speaker 1: because it's it's an entirely political market. And say, you know,

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Speaker 1: it's not a let's say, real commodity market. There's no

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Speaker 1: storage of carbon per se, like you have a gas

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Speaker 1: storage and and that kind of thing. So that closet

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Speaker 1: we put them in, it's it's a metaphorical closet. Yes, exactly, exactly,

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Speaker 1: So so yeah, I mean it is going to be volatile.

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Speaker 1: It's not going to be an easy right, and the

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Speaker 1: e U ty has cannot do it in a vacuum.

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Speaker 1: It needs supporting policies like support for hydrogen projects that

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Speaker 1: we are now seeing being announced in different EU member states.

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Speaker 1: We know that there are large commercial scale hydrogen projects

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Speaker 1: within the EU plan to go operational in in around

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Speaker 1: and then gradually ramp up the full capacity by twenty thirty.

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Speaker 1: So it is happening, and of course it will be

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Speaker 1: if you look at the general trajectory, it will be gradual.

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Speaker 1: But if you look at you know, whatever could happen

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Speaker 1: within a year, it would I wouldn't be surprised to

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Speaker 1: see spikes of twenty euros or or or of twenty euros.

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Speaker 1: Now for a very short break, stay with us. So

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Speaker 1: as we talk about price, one of the options while

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Speaker 1: dealing with the carbon prices is something called fuel switching.

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Speaker 1: Before we get into the you know how the price

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Speaker 1: plays out, can you explain fuel switching and how companies

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Speaker 1: go about it. Fuel switching has been the dominant form

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Speaker 1: of emission reductions within the e U t S in

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Speaker 1: the past couple of years. What that means is some

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Speaker 1: markets have an over capacity within their power market. Coal

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Speaker 1: is generally the cheapest fuel you can use to or

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Speaker 1: call or lignite is generally the cheapest form of fuel

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Speaker 1: you can use to to generate power, but they are

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Speaker 1: really emissions intensive. Gas is more expensive but only have

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Speaker 1: around half of the emissions intensity of coal. So in

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Speaker 1: those markets where we have excess capacity within the power

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Speaker 1: market and we have both coal and gas plants, what

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Speaker 1: will happen is for the carbon market to balance, there

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Speaker 1: will be a a need for some of those gas

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Speaker 1: plants to take over a lot of the generation from

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Speaker 1: some of those cold plants. No, as the carbon price

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Speaker 1: goes up, it will become more expensive to produce power

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Speaker 1: both by coal and by gas, but because coal's emissions

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Speaker 1: intensity is higher, that will be affected more. And at

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Speaker 1: some point, when the carbon price gets high enough, it

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Speaker 1: becomes economically cheaper to produce power with gas than cold.

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Speaker 1: So you get this dynamic where gas used to be

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Speaker 1: a more expensive option, but because of the carbon price,

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Speaker 1: it becomes a cheaper option than cold. Dana, I don't

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Speaker 1: know about you, but I'm just really encouraged by this.

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Speaker 1: It just seems like, you know, maybe I'm naive, but

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Speaker 1: it seems like e U e t S works. It's

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Speaker 1: pulling carbon out of the air, right, I think he's

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Speaker 1: In the report it said something like a hundred and

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Speaker 1: fifty eight million tons so far. I want to say, um,

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Speaker 1: and honest way to I think it's a two. I'm

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Speaker 1: not sure, but anyway, it seems that as the price

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Speaker 1: goes up, you know, when it's low, you just pay

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Speaker 1: for it. When it goes a bit higher, you do

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Speaker 1: fuel switching, then you do renewables, and then it makes

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Speaker 1: sense to suck the CEO two right out of your process,

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Speaker 1: your industrial process, and then add more sectors to it.

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Speaker 1: And that is why later in the show, we're also

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Speaker 1: going to talk about the UK emissions Trading scheme because

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Speaker 1: even though they brexited the European Union, they want to

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Speaker 1: keep the emissions trading part. It works, it works, or

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Speaker 1: at least it's it's working until now, and it's important

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Speaker 1: to keep keep in mind that the U t has

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Speaker 1: can't work alone. It needs supporting policy around it to

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Speaker 1: to drive the price of nascent Decomganization technologies don't, particularly

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Speaker 1: in the R and D phase or the pilot phase

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Speaker 1: of a new technology. So it does work in the

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Speaker 1: sense that it can drive fuel switching, and it can

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Speaker 1: also to to some degree, will drive renewable spuild We

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Speaker 1: haven't seen industriallycomganization yet, so we don't exactly know if

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Speaker 1: it will function when we get to that stage, but

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Speaker 1: we believe it will because we're already seeing these hydrogen

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Speaker 1: projects coming online, and then we talk to companies, they

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Speaker 1: say it is because they expect the carbon price to

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Speaker 1: go up. The really important thing to keep in mind

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Speaker 1: is that the fifty euros or sixty euros price we

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Speaker 1: have now, it's an important signal two industrial companies that

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Speaker 1: the market is a has to be taken seriously now.

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Speaker 1: So it's an investment signal now to prepare for the future.

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Speaker 1: If the price was twenty years per twn this year,

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Speaker 1: that signal wouldn't be as strong. And if we think

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Speaker 1: about the investment cycle for these big industrial companies, we

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Speaker 1: are typically talking anywhere between five and fifteen years. So

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Speaker 1: if we want to decarbonize heavy manufacturing industry within the

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Speaker 1: EU by thirty that investment decision has to happen today,

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Speaker 1: and that is why the high price today is such

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Speaker 1: an important signal for industrial lead companization in the future.

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Speaker 1: Time to get cracking, exactly, we're already too late. They

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Speaker 1: should really have started yesterday, but we are where we are,

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Speaker 1: and the best place to you know what, to say that,

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Speaker 1: the best place to start this is yesterday, and failing that,

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Speaker 1: let's start today. So you mentioned reducing the cost of

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Speaker 1: nascent carbon reduction technologies. I remember, you know, I used

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Speaker 1: to be a CCS analyst about a decade ago, and

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Speaker 1: one of the ideas back then at least, was that

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Speaker 1: they would use the proceeds for EU A s that

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Speaker 1: were just you know, purchased to fund demonstration plants. Is

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Speaker 1: that still the idea or what are the proceeds being

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Speaker 1: used for that is still the idea. So we have

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Speaker 1: this innovation fund that will support CCS projects and hydrogen

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Speaker 1: projects and the like and so um. One of the

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Speaker 1: advantages with the CCS is that you will get support

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Speaker 1: from the innovation fund and from other sources, but you

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Speaker 1: will also help a company avoid the high cost of

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Speaker 1: emitting seal two. So you have essentially two income streams

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Speaker 1: where if you are a company focusing purely on CCS,

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Speaker 1: you could charge your customers, as it were, a price

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Speaker 1: that is slightly lower than the eu A price, and

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Speaker 1: then they can then sell their own eu A s

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Speaker 1: to other companies and make a profit. So you have

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Speaker 1: a not recharge opportunity there. But that is only possible

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Speaker 1: with support, as CCS is quite expensive still, so you

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Speaker 1: just need a price that supports it. You need a

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Speaker 1: price that that supports it, and you need, like I said,

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Speaker 1: support for pilot projects and underlike the encouraging thing that

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Speaker 1: we're seeing. Now let's talk about industrial clusters. So the

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Speaker 1: idea is that rather than having so a few megaprojects

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Speaker 1: supporting the whole of EU, we start with some smaller projects,

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Speaker 1: putting large industrial clusters, for example in the south of Germany.

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Speaker 1: That way, you don't have to build a massive amount

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Speaker 1: of infrastructure to put these projects into place, whether that

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Speaker 1: be CCS or high rogen. So, since I think we

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Speaker 1: have probably a few people listening today who aren't super

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Speaker 1: knowledgeable on the emissions trading schemes, both in the UK

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Speaker 1: and the EU, where else in the world are these

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Speaker 1: if this is an effective mechanism, have any other countries

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Speaker 1: or I'm going to lead on this one states that

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Speaker 1: have U S states who have looked at doing something similar. Absolutely,

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Speaker 1: so there are, like you said, in the United States,

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Speaker 1: we have the California Quebec emissions trading systems and the

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Speaker 1: and Reggie the Regional Greenhouse Gas Initiative. So we also

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Speaker 1: know that Washington State will start a emissions trading system.

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Speaker 1: I think by twenty twenty three we have an emission

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Speaker 1: trading system in China for the power sector and several

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Speaker 1: regional systems for industrial sectors in China as well. Then

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Speaker 1: we have trading systems in Korea, Kazakhstan, New Zealand, and

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Speaker 1: I'm sure I forgot some on the horizon. We also

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Speaker 1: have these. Kenya has recently announced an emission trading system,

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Speaker 1: and so has Ukraine. So it is popping up several

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Speaker 1: places that there are already several, but there are more.

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Speaker 1: Comic do you expect them to link? No, I don't

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Speaker 1: expect them to link. We know that the one linkage

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Speaker 1: we've had within the EU is the EU and the

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Speaker 1: Swiss eas linking. They were really close and designed to

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Speaker 1: each other, so all of the designed parameters were broadly similar,

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Speaker 1: and it still took ten years to link those two markets.

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Speaker 1: So it's it's it's a it's a difficult one, but

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Speaker 1: but the other one, the u K e T S

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Speaker 1: will likely link with the e U t S. But

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Speaker 1: other than that, these broad international or a cross continental

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Speaker 1: links are far away in the future. Hopefully we'll see them,

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Speaker 1: but I wouldn't expect to see them within the next

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Speaker 1: five years. I love how Jan said no when you

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Speaker 1: asked him if they're going to link. He's like, no,

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Speaker 1: are you crazy? You could hear in his voice like

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Speaker 1: obviously not. I just I just remember the what California

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Speaker 1: and Quebec capitrats linked, right, Yes, I mean it is

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Speaker 1: a lot easier to link regional markets within the same

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Speaker 1: continent than it is to to do cross continental linkage.

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Speaker 1: It is also politically difficult because you need to you

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Speaker 1: need countries that are not necessarily on the best terms

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Speaker 1: to get to an agreement of fungibility, and you know

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Speaker 1: the different parameters of linking not not not least conflict resolution.

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Speaker 1: So yeah, and we've we've talked about regional expansion of

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Speaker 1: current markets. But going back to the EU e t

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Speaker 1: S just for just a second, let's talk about sector expansion.

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Speaker 1: In the report, you mentioned that it's likely that maritime

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Speaker 1: will be included soon and aviation is looking possible. My

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Speaker 1: question here is, looking at fuel switching, it seems hard

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Speaker 1: for these sectors to do fuel switching and reduce emissions.

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Speaker 1: Are they just going to be on the hook for

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Speaker 1: just buying us to some degree, yes, but there are

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Speaker 1: ways to reduce emissions in maritime and there are ways

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Speaker 1: to reduce emissions in in aviation, although it's not straightforward

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Speaker 1: at all. First, what we're talking about is intra e

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Speaker 1: A maritime, so that is only maritime transport that starts

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Speaker 1: and enced within the European Economic Area. We already have

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Speaker 1: intra aviation within the EU it t S, and what

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Speaker 1: they might want to do is expanded to international aviation,

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Speaker 1: although that might be in doubt because of this new

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Speaker 1: Corsia offset scheme for international aviation when it comes to

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Speaker 1: reducing emissions. Yes, they are. These are sectors that don't

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Speaker 1: have an easy access to decorganization technologies. Let's say, but

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Speaker 1: we know there are electric ferries running in in Norway

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Speaker 1: and elsewhere, so you know it, it's not an impossible feed.

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Speaker 1: The idea of expanding is that when you have a

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Speaker 1: larger market, you have more effective price formation and these

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Speaker 1: markets will probably be protected by free allocation in in

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Speaker 1: the beginning. To other sectors that are of interest is

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Speaker 1: hitting and transport. So Franz Timmermans, who is the Vice

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Speaker 1: President of European Commission. In April he said that they

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Speaker 1: would start a separate e t S for hitting and

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Speaker 1: transport within the EU. Now the goal is to link

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Speaker 1: that e t S with the e U t S

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Speaker 1: at some point in the future, and that way you

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Speaker 1: have an indirect expansion of the scope of the of

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Speaker 1: the e U t S. So yeah, and just to

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Speaker 1: kind of bring it all home here on this you're

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Speaker 1: seeing some increasing prices on the EU e t S side.

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Speaker 1: What is it that you want to watch? As the

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Speaker 1: UK has well completes now their first year with their

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Speaker 1: own emissions trading scheme. For me, the most interesting part

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Speaker 1: to see how closely the price of the u k

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Speaker 1: it t s will be linked to the EU t s.

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Speaker 1: It is quite possible that we will see a link

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Speaker 1: between the UK and EU t s in the future,

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Speaker 1: so for me that that suggests um possible price convergence

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Speaker 1: between the two more markets, and another reason for price

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Speaker 1: convergence is that we have a lot of UK power

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Speaker 1: companies who have hedged EU a s and they will

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Speaker 1: likely unwind those hedges and buy into into the UK

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Speaker 1: has when the price is right for them, and the

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Speaker 1: price would be right if there are similar prices between

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Speaker 1: the two markets, or if there is a premium on

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Speaker 1: EU A s. So you might have a situation where

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Speaker 1: you have a more expensive EU allowance than a UK allowance.

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Speaker 1: Then you will have power companies taken advantage of that

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Speaker 1: by selling off an EU allowance and buying a UK allowance.

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Speaker 1: That way, the price of the EU allowance will go

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Speaker 1: down and the price of the UK allowance will go

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Speaker 1: up and we will have some convergence. So for me,

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Speaker 1: that is the number one thing to look out for.

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Speaker 1: The second thing to look out for is news on

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Speaker 1: linking the two systems. It is unlikely that they will

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Speaker 1: be linked by twenty two, so probably twenty twenty three

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Speaker 1: is the earliest possible year. Now of both the EU

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Speaker 1: and the u K agree that linking is advantageous for

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Speaker 1: both sides. The problem is that carbon markets are not

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Speaker 1: on the top of the agenda of the prime ministers

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Speaker 1: of the world or the the the highest level of government,

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Speaker 1: so it might fall victim to two larger negotiations between

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Speaker 1: the two parties. But hopefully we will see a link

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Speaker 1: in the in the next couple of years. Yeah, do

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Speaker 1: you have any final thoughts for us? It's really encouraging

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Speaker 1: to see the market had recovered from the doldrums of

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Speaker 1: twenty seventeen when the reform for one to thirty was

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Speaker 1: taking place. It really was the last chance saloon for

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Speaker 1: the market. A lot of political capital had been spent

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Speaker 1: on it and it was seemingly going nowhere. This is

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Speaker 1: really an example of effective policymaking and how the European

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Speaker 1: Commission has learned from previous mistakes, and they should be

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Speaker 1: lauded for that. We are now in a situation where

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Speaker 1: e U t S is no longer a compliance is

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Speaker 1: you for large corporate entities, but it is a real

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Speaker 1: strategic risk going into the future, and that is where

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Speaker 1: it needs to be to drive these investment decisions. So

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Speaker 1: I would say that the development of the of the

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Speaker 1: uv T S is again is a It's a really

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Speaker 1: great example of effective policy making. People within the European

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Speaker 1: Commission and in the EU as a whole really compat

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Speaker 1: themselves on the back for what's happened in the last

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Speaker 1: few years. This week's show was produced by Ava gonzaleze

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Speaker 1: Isla and edited by Rex Warner of gray Stoke Media.

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Speaker 1: Bloomberginny app is a service provided by Bloomberg Finance LP

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Speaker 1: recommendation as to an investment or other strategy. Bloomberguinnia should

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Speaker 1: not be considered as information sufficient upon which to base

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Speaker 1: an investment decision. Neither Bloomberg Finance LP nor any of

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Speaker 1: its affiliates makes any representation or warranty as to the

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