The 2020 survey of carbon markets participants, produced by PwC UK’s Sustainability and Climate Change team for the International Emissions Trading Association (IETA), has found:
The report covers recent progress and expectations for compliance and voluntary markets across several geographies, as well as Natural Climate Solutions (NCS) and aviation.
“This survey reveals bearish sentiment around carbon prices across all emission trading regimes on account of COVID-19, with an upturn not expected for perhaps one to two years. Similarly, the expansion of carbon pricing regimes to other countries is likely to slow. There are, however, more positive signals around the greater adoption of absolute carbon targets by corporations and a resurgence in customer interest to mitigate the environmental impacts of the products and services they choose. This should underpin pricing for voluntary carbon credits over the medium term.”
Average carbon price expectations for the EU ETS over successive surveys
What do you expect the average carbon price to be for each of the following ETSs in the periods 2020 and 2021-30?
A survey conducted by PwC of over 130 IETA members from across the globe has revealed that carbon market participants expect the COVID-19 pandemic to weigh on emissions allowance prices for the next two years, with price expectations for the coming decade also dropping. Respondents expect carbon prices to be significantly lower than what they think is needed to limit global warming to below 2°C.
The UN Aviation body’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is also expected to suffer setbacks. Both market participants and airlines think that it will be significantly negatively affected by COVID-19 for the next three years, but beyond this the outlook is more optimistic. In addition, confidence in China’s national ETS launching in the next two years has reduced this year, with only one-third of respondents expecting trading to start by 2021 compared to two-thirds last year.
Nevertheless, voluntary corporate action on climate is increasing. Two-thirds of survey participants said that their organisation has a long-term emissions reduction target, and the majority of these were absolute ‘net zero’ targets. Most respondents also stated that they plan to take advantage of carbon credits to achieve these goals, alongside renewable energy investments, energy efficiency and new business models. Further, market participants are confident that the market can accommodate the observed increase in pledges.
“Prices will be closely correlated to the shape of COVID recovery in the short term, but in the longer term there will be broader forces around to what degree certain sources of emissions will return, and that we might see systematic behavioural changes as a result of post-pandemic economic structures being reshaped.”
The report’s authors would be very happy to discuss what this could mean for your business or organisation. If you are interested, please refer to the contacts below.