EU carbon prices are expected to average €10.79 over the EU ETS third phase (2013-2020), an annual survey of market watchers found, up from an estimate of €8 made a year earlier.

It was the first time for four years that a poll of IETA members expected prices to rise, according to consultancy PwC, which conducted the survey now in its tenth year and published at the Carbon Expo in Barcelona.

“This year’s survey is a sign that, after a few years of crisis and reform, market participants see a stronger EU ETS in the future, and that sentiment is increasingly positive around the world,” said Dirk Forrister, CEO and President of IETA, in a statement.

Prices between 2020 and 2030 are expected to average €18.40, but this is still far below the €29.60 level the respondents said was needed to drive low-carbon investment.

INVESTOR VOID

The price expectations are well above the forward curve of futures prices on ICE, which on Tuesday settled at €8.06 for contracts for delivery in December 2020.

The large discrepancy between the survey’s findings and the forward curve is because long-term investors view betting on the move as too risky, turning down the prospect of high returns due to the excessive volatility seen in carbon prices in recent years, analysts said.

“There’s not a huge amount of buy-and-hold speculators out there – that’s partly because of the volatility. The narrative isn’t going to say to institutional investors ‘please put your money here’.” said Trevor Sikorski, an analyst at Energy Aspects told the Expo.

“People have been burnt far too many times,” added BNEF analyst James Cooper.

“Those who have investment horizons of more than two months don’t really exist (in the EU ETS) anymore. There’s just not really the interest.”

By Ben Garside – ben@carbon-pulse.com