Market Overview

This week witnessed key developments in carbon markets, renewable energy policies, and global geopolitics. The EU carbon market continues to demonstrate resilience, investment funds are exhibiting strong price forecasting capabilities, and fresh warnings over climate commitments have emerged. Meanwhile, European leaders are working on a new Ukraine peace plan, and nations have finalised a deal to finance nature protection following lengthy negotiations. Here is a closer look at the biggest stories from Week 11.

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Carbon Markets

‍A new analysis of Commitment of Traders (CoT) data has found that investment funds and financial institutions have shown remarkable accuracy in forecasting long-term EUA price movements. Despite holding a relatively small share of long and short positions in the EU carbon market, these financial players are influencing price expectations and shaping market trends. Analysts believe that their ability to anticipate pricing shifts could provide critical insights into future EUA market behaviour.

Meanwhile, in the voluntary carbon market, experts in New Zealand are warning the government about its commitment to the 2030 Paris Agreement targets. Advocacy groups and climate experts argue that recent government statements downplay the legally binding nature of New Zealand’s climate commitments under the agreement, raising concerns about the country’s long-term decarbonisation strategy.

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Renewables and Biofuels

A Kenyan firm has announced plans for a 195MW solar plant aimed at producing 40,000 tonnes of green ammonia annually. The project, located in Kenya’s Rift Valley, will integrate a 20 MWh electrolyser to generate green hydrogen, which will then be combined with atmospheric nitrogen to create green ammonia. This initiative aims to reduce reliance on imported fertilisers from regions such as Russia, while also cutting emissions from traditional ammonia production. (BN)

The European Commission is set to propose new measures to boost demand for electric vehicles (EVs) and require a greater share of locally produced batteries in European-manufactured EVs. The proposal, expected to be released on 5 March, seeks to counter declining EV sales in Europe, which fell by 5.9% in 2024 due to a combination of insufficient charging infrastructure, declining subsidies, and price competition from foreign manufacturers. The EU aims to increase domestic battery production and offer incentives for EV adoption to maintain competitiveness against China and the United States in the global EV market.

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Macroeconomics and Trade

‍European leaders, including UK Prime Minister Keir Starmer and French President Emmanuel Macron, have joined forces to draft a Ukraine peace plan, which they intend to present to the United States. The initiative follows a tense diplomatic exchange between Ukrainian President Volodymyr Zelensky and US President Donald Trump, which raised concerns over US support for Ukraine’s defence. European nations are seeking to ensure that Kyiv remains a central player in peace talks while increasing their own defence spending to gain US backing for a security agreement. However, details of the plan remain unclear, and European leaders are struggling to align their positions.

At the same time, nations have reached an agreement to finance global nature protection efforts, finalising a deal after previous failed negotiations. The agreement, reached during UN COP16 talks in Rome, commits countries to mobilising $200 billion annually by 2030 to halt and reverse biodiversity loss. Led by Brazil, Russia, India, China, and South Africa (BRICS), the deal seeks to secure funding from both public and private sources. The agreement also lays the groundwork for implementing the Kunming-Montreal Global Biodiversity Framework (GBF), which includes key global conservation targets.

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Key Takeaways

‍Investment funds have demonstrated strong EUA price forecasting abilities, reinforcing their influence in the carbon market. New Zealand is facing criticism over its commitment to the 2030 Paris targets, raising concerns about its climate credibility. In the renewable energy sector, Kenya is progressing with a major solar-powered green ammonia project, while the EU is planning policies to boost EV demand and localise battery production. On the geopolitical front, European leaders are drafting a Ukraine peace plan to present to the US, seeking security guarantees for Kyiv. Meanwhile, a breakthrough agreement at COP16 secures $200 billion annually for global biodiversity protection, highlighting the increasing urgency of environmental finance.