Carbon Emissions: It Takes CO2 To Cotango


Authors
Mark C. Lewis and Isabelle Curien

Research Organisation
Deutsche Bank

Report Date
May 1, 2008

Document summary

Now there is full banking of EUAs between ETS trading periods carbon prices should in theory follow a classic contango forward curve, whereby today’s price reflects the most valuable expected price in the future, discounted back in real terms. The most valuable point in the future is where the EUA price hits the level required to fulfil the policy objective and Deutsche Bank thinks the ETS policy objective is to make carbon-capture-and-storage power plants the new entrant of choice by 2020, estimating that a EUA price of €40/t is necessary to incentivise this new CCGT capacity build.

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