Document summary
Analysing the European Commission’s draft auctioning legislation of Phase-3 EUAs and the politics surrounding the process, Deutsche Bank now assumes that the early auctioning of Phase-3 EUAs will be limited to only 200m allowances in 2012 (in addition to the 200m the European Investment Bank will sell in 2011). Generators will now need to achieve a higher level of abatement over 2010-12 than previously assumed. The bank continues to see the December 2010 contract at €16/t by June 2010 with prompt prices reaching €18 - €20/t by year-end 2010 driven by the cost of fuel switching next winter.