Pity the carbon trader. For the most part, commodities markets are led by the ebb and flow of physical fundamentals. The more misty-eyed of market purists might describe the dynamic dance between supply and demand as a delicate ecosystem of cause and effect. After a few drinks they might, anyway.
Less so for the carbon market. While their gas and power trading colleagues monitor the shifts in output from pipelines, storage facilities, windfarms and interconnectors the carbon trader is shackled to a Bloomberg news terminal.
The carbon market is too distorted and deformed by years of chronic oversupply. Traders are less concerned with the nuances of future demand for allowances than the possible sledgehammer of much-needed market reform.
This week leaked documents from the European Commission’s environment committee helped carbon prices climb to their highest point in two years by suggesting there was consensus ahead of the 24 February vote on whether to implement the market stability reserve sooner or later.
The wavering whims of those lawmakers is a far bigger factor than the subtleties of allowance demand as generators flip between gas and coal-fired power.
Still, waiting for a news alert that triggers some of the biggest market moves in years is bound to be more fun than mindlessly watching the market languish in the doldrums as it has done in the past. It certainly offers more chance to turn a profit, so perhaps it’s not all bad.