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International Carbon Action Partnership 1
Carbon Markets and COVID-19
William Acworth, Head of ICAP Secretariat
4th November 2020
27- 28 October 2020 International Carbon Action Partnership 2
International Carbon Action Partnership 2
Allowance price developments over the last 10 years
Upwards long-term
trend in prices
EU ETS** $23.66
South Korea ** $18.00
New Zealand** $23.53
California* & Québec* $16.68
RGGI* $6.82
Short term dip in prices
associated with reduced
economic activity from COVID-
19 containment measures.
Quick recovery of allowance price impacts from covid-19 first wave
* Auction price
** Market price
27- 28 October 2020 International Carbon Action Partnership 3
International Carbon Action Partnership 3
A closer look, WCI auction and secondary market
Short term decline in
secondary market
prices.
Allowances withheld
from the market due to
the auction reserve
price.
Auction settles at
reserve price and
secondary market
recovers.
Market stability mechanisms are an important feature of all established markets
Source: ICE data
27- 28 October 2020 International Carbon Action Partnership 4
International Carbon Action Partnership 4
 On compliance deadlines
– Most major systems (EU ETS, Regional Greenhouse Gas Initiative (RGGI), Western
Climate Initiative (WCI)) did not move their 2019 compliance deadlines
– Others shifted their compliance deadlines such as the Korean ETS (K-ETS) , the
Swiss ETS, most Chinese pilots and the Canadian federal ‘backstop’ output-based
pricing system (OBPS)
 On policy decisions
– For example, China national ETS, and US Transportation and Climate Initiative
final MOU
– Yet significant policy development in New Zealand, Korea and the Europe Union
 On Auctions
– Some auction impacts in WCI, K-ETS, EU ETS, and the Swiss ETS, with either
shifted, cancelled or undersubscribed auctions (demand was short of auctioned
volume or non-existent)
COVID-19 ETS Impacts
27- 28 October 2020 International Carbon Action Partnership 5
International Carbon Action Partnership 5
Markets responded to the sharp drop in emissions, which is to be
expected.
Market stability mechanisms appear to have been largely effective in
absorbing much of the initial shock caused by COVID-19 lockdowns,
slumps in economic activity, and decreased allowance demand.
Policy makers will watch their systems carefully as we face uncertain future
demand due to ongoing COVID-19 containment measures.
Political will remains strong as increasingly jurisdictions commit to net
zero reduction targets and lawmakers understand that post-virus recovery
is an opportunity to accelerate a low-carbon pathway
Takeaways and outlook

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  • 1. International Carbon Action Partnership 1 Carbon Markets and COVID-19 William Acworth, Head of ICAP Secretariat 4th November 2020
  • 2. 27- 28 October 2020 International Carbon Action Partnership 2 International Carbon Action Partnership 2 Allowance price developments over the last 10 years Upwards long-term trend in prices EU ETS** $23.66 South Korea ** $18.00 New Zealand** $23.53 California* & Québec* $16.68 RGGI* $6.82 Short term dip in prices associated with reduced economic activity from COVID- 19 containment measures. Quick recovery of allowance price impacts from covid-19 first wave * Auction price ** Market price
  • 3. 27- 28 October 2020 International Carbon Action Partnership 3 International Carbon Action Partnership 3 A closer look, WCI auction and secondary market Short term decline in secondary market prices. Allowances withheld from the market due to the auction reserve price. Auction settles at reserve price and secondary market recovers. Market stability mechanisms are an important feature of all established markets Source: ICE data
  • 4. 27- 28 October 2020 International Carbon Action Partnership 4 International Carbon Action Partnership 4  On compliance deadlines – Most major systems (EU ETS, Regional Greenhouse Gas Initiative (RGGI), Western Climate Initiative (WCI)) did not move their 2019 compliance deadlines – Others shifted their compliance deadlines such as the Korean ETS (K-ETS) , the Swiss ETS, most Chinese pilots and the Canadian federal ‘backstop’ output-based pricing system (OBPS)  On policy decisions – For example, China national ETS, and US Transportation and Climate Initiative final MOU – Yet significant policy development in New Zealand, Korea and the Europe Union  On Auctions – Some auction impacts in WCI, K-ETS, EU ETS, and the Swiss ETS, with either shifted, cancelled or undersubscribed auctions (demand was short of auctioned volume or non-existent) COVID-19 ETS Impacts
  • 5. 27- 28 October 2020 International Carbon Action Partnership 5 International Carbon Action Partnership 5 Markets responded to the sharp drop in emissions, which is to be expected. Market stability mechanisms appear to have been largely effective in absorbing much of the initial shock caused by COVID-19 lockdowns, slumps in economic activity, and decreased allowance demand. Policy makers will watch their systems carefully as we face uncertain future demand due to ongoing COVID-19 containment measures. Political will remains strong as increasingly jurisdictions commit to net zero reduction targets and lawmakers understand that post-virus recovery is an opportunity to accelerate a low-carbon pathway Takeaways and outlook