Michael Berends, CEO of ClearBlue Markets, considers recent trends in compliance carbon markets and how the company is helping clients to navigate the patchwork of programmes and systems.
Environmental Finance (EF): What trends have driven activity and pricing in North American and European compliance markets during 2024?
In 2024, developments in the EU compliance carbon market focused on the first year of implementation of the market reform under the newly adopted "Fit for 55" climate package, which aims for a 55% reduction in greenhouse gas emissions compared to 1990 levels by 2030. It was also the first year that the maritime sector was included in the EU ETS. The allowance price faced downward pressure due to weak fundamentals, with the rapid development of renewable energy reducing emissions from the EU power sector. The slight increase in allowance auction supply to finance the REPowerEU plan added to the supply-side pressure. Throughout the year, the EU carbon price also remained closely correlated with EU gas prices through traditional fuel switching dynamics.
EF: What will likely be the dominant themes for compliance markets in 2025?
MB: In North America, dominant themes are affordability and fallout from the elections. With a pullback in federal support for clean energy, compliance with state or regional goals becomes more difficult and more costly. We are already seeing challenges to California's automobile standards and more offshore wind cancellations on the East coast. California also started the year dealing with devastating wildfires. The California legislature continues to look at the impact of the cap-and-trade on energy bills, but at the same time the programme's revenues can be directed back to consumers to provide relief. The continuation of the Greenhouse Gas Reduction Fund is critical for climate programs in local communities. The legislature is expected to discuss an extension of the cap-and-trade post-2030 this year, with bills introduced in February. With respect to WCI, market participants are most anticipating the formal rulemaking proposals from California and Quebec that would reduce WCI allowance supply starting 2026. Meanwhile, California LCFS regulations adopted in 2024 are expected to take effect in 2025 after some lingering technical issues are addressed. Also echoing affordability, a 2025 bill floated in Washington would freeze the price ceiling and associated trigger levels for 2026 to 2027 to help constrain allowance prices as linkage with WCI is pursued. RGGI states will continue to look at the impacts of electrification, loads tied to AI and reduced support for renewables on state goals and the programme as a whole. Governor Kathy Hochul, up for re-election next year in New York, has signalled the state 'cap-and-invest' programme will not likely start in 2026, and 2025 rulemaking efforts may focus more on reporting requirements.
2025 is an exciting year for the EU ETS, with the regulatory side getting more focus again. The EU is due to formally propose the 2040 climate target and submit updated nationally determined contributions (NDCs) under the Paris Agreement. Political considerations, such as the shift to the right in Germany's February election, will influence the post-2030 discussions. Market participants are also changing their behaviour to embrace the tighter carbon market rules. Industry has begun to prepare for tighter allowance benchmarks and the looming phase-out of free allowances tied to the EU Carbon Border Adjustment Mechanism (CBAM), as the CBAM itself undergoes implementation tweaks. The maritime sector is preparing for its first verified emissions reporting and allowance surrender in the EU compliance carbon market. Meanwhile, volatility is here to stay with shifting sentiment in the gas market and tariff disputes affecting participants' compliance and trading strategies.
In the UK carbon market, rising optimism of the UK-EU ETS linkage and anticipation of the design of upcoming UK supply-adjustment mechanism are key events that market participants are watching out for.
EF: What will ClearBlue Markets be doing to meet client demands?
MB: We continue to support our clients in compliance markets as the markets continue to grow, prices rise, and obligations increase. With deep expertise in environmental markets, regulatory policy, and carbon transactions, our team provides tailored advisory services that help companies minimise compliance costs, maximise market opportunities, and achieve their emission reduction goals. Navigating the patchwork of carbon pricing programmes across North America, Europe, and emerging markets requires a comprehensive, integrated approach. Our team ensures that clients can confidently manage their carbon positions by providing real-time insights, regulatory guidance, and transactional support across both established and developing compliance markets. We help clients not only meet their current obligations but also prepare for emerging programmes, positioning them for success as new regulatory frameworks evolve.
Our services span market intelligence, policy analysis, risk mitigation, project development, and market access, all powered by Vantage, our AI-enabled carbon intelligence platform. By leveraging cutting-edge technology, we simplify the complexity of carbon compliance, streamlining data collection, analysis, and forecasting to provide integrated, real-time insights. This allows clients to optimise compliance strategies, integrate carbon market participation with broader sustainability goals, and align their decarbonisation efforts with regulatory requirements. We support entities in cap-and-trade programmes, output-based pricing systems, carbon tax systems, offset markets, and fuel standard programmes across Canada, the US, the EU, and emerging jurisdictions. With a strong track record of success, we have guided over 300 clients through the complexities of carbon compliance, ensuring they not only meet obligations but also leverage carbon pricing as a tool for long-term value creation.
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