Is CO2 a new inflation hedge?

As economies jolt back from pandemic-led destruction, there are growing concerns about inflation. An influx of speculative activity in the EU carbon market – which has whipsawed CO2 prices to record highs above EUR 56/t and then below 50/t in a matter of days – suggests investors may be using the ETS as a hedge against inflation.

Listen in to this week’s debate. 

Guests: 

• Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv
• Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects
• Bjarne Schieldrop, Chief Analyst Commodities, SEB

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

News drives markets, and every day Montel's experience reporters are on top of the stories that shape European market developments. Can you afford to miss out? Go to monte news.com for the latest price driving stories and a free trial.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:30

Hello listeners and welcome to the Montel Weekly podcast, bring Energy Matters and an informal setting. In today's pod, we look at the European carbon market and discuss the key issues at play. Quite a lot to talk about carbons. Rapid price gains are dividing opinions over what forces are behind the benchmark contract doubling in value to above 50 euros over the past six months. Some have said the movement's have been breathtaking. Others chronological and others overheated. So we've seen some dramatic price movements in recent weeks and for us on the news desk, we've had to muster all our creative writing skills to avoid too much repetition as every day seem to see a fresh record broken. We are recording this and Wednesday. We are seeing some quite significant downward price movements, so carbon's down. So what's up? Helping me Richard Sverrisson, to explain current market dynamics and to look into the coming weeks and months ahead are some familiar voices. First of all, Ingvild Sorhus and listed Refinitiv. Great to have you on the pod again,

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 1:30

Thank you, Richard. Great to be here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:32

Perfect. I had a kind of deja vu recently and I was thinking back to August, 2018 when you were a speaker at a Nordic Energy Days and prices was arising as you were speaking on as you were giving your presentation. And then a few weeks late later they crashed. So that's quite a similar situation to, to today really, although maybe too soon to say crash. But

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 1:52

yes, definitely.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:53

And also Bjarne Schieldrop analyst at Sweden's, SEB Bank. So welcome back, Bjarne.

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 1:58

Thank you very much. Good to be here again.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:00

Normally we talk oil, but I sense that the carbon is one of your old loves. And as you certainly started writing more about the commodity this year. Yeah.

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 2:08

I used. To be a carbon market analyst for three years from 2005 onwards, just before I joined SEB. And this is I mean my primary focus is for our industrial clients and all of them have a common denominator, and that's carbon. And now with much higher prices, that's certainly a big product for our industrial clients. And that's why I'm dragged into to writing about this. And it's a pleasure to do that.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:29

Perfect. And finally, and last but certainly not least is our old friend Trevor Sikorski of Energy aspects. So welcome back to you, Trevor, and excellent to have you on board to give your views on what's thriving prices at the moment.

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 2:39

Thank you, Richard. Always a pleasure to be here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:42

Excellent.'cause you are an expert not only on carbon, but also on gas. So I think that should be quite quite helpful today. You guys know each other, don't you? You met before.

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 2:49

We're all X point carbon, so we're all at point carbon together back in the day, so it's nice to be back with a bunch of, a bunch of colleagues.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:57

Excellent. Perfect. Current prices. If I could then start with you, Trevor. It took less than a month to get from 45 euros to 55, and now we've nearly fallen, we've nearly fallen five euros in two days. What? What's going on?

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 3:08

When you look at. The carbon run that we've seen today? Yes, there's, there has been some supportive fundamentals, but generally it's been driven by a huge inflows of investor money coming in, and investor money is notoriously volatile. We have seen huge amounts going into the options market. When we saw, when we mo saw the move from let's say 45 above 50, which happened, very rapidly, it was something like 40 million tons of open interest going into the call options. And then really driving that some very high levels of open interest at calls like 50. And there wasn't that much before it, there wasn't that much after it. But then we saw, a lot of, we saw I think 10 million tons just going on Friday. A lot of money coming in, it can go out as well. And so you can see profit taking, you can see stop loss, you can see a number of things. It is volatile. And when it's driven so, so spectacularly upwards, usually, there is new money coming into the market and that's just been one of the primary things. And for an analyst that just makes it very hard to call.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:06

Yeah, absolutely. What's your view here? Bjarne.

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 4:08

It's it's always difficult to dissect exactly what is the course and what's the primary course. And I think one thing we have seen since last summer is a massive increase in the oil price and a massive increase in the gas price and a natural, very large increase in coal to gas switching differentials, if the CO2 price had gone up exactly as much as the switching differential, but from coal to gas, then you wouldn't have seen any buying or selling from utilities. They would continue to produce just as ma much power from coal and just as much power from gas and emit just as much CO2 from each source with no need to buy or sell. So you would just have a higher CO2 price to reflect the new balance and so that is of course, a part of the story. A much higher relative balancing point between coal and gas than we had this summer. So that has increased but the CO2 has, price has increased sign or a bit more, so speculators have driven that up as well on top of that move. And I think, the market is always. Looking for some fundamentals to tie views into them, so speculators as well, they are also looking at the coal to gas differentials in addition to politics to try to figure out, what kind of drivers are pushing us fundamentally in, in different directions. And Trevor he mentioned that, speculators are transitory and yes, I fully agree. Over time they even out and they don't really set the price over time, but they help to move the price. And sometimes exaggerate the price move as well, so the upturn has been riding on fuel fundamentals and driven further by, by speculators. And right now, we see a huge correction in gas prices. And I likewise also correction in speculative speculators. Probably trying to do some exits on top. Fine.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:57

Ingvild, what's your view here? Gas speculators, bit of both. 50, 50, 70, 1, 30. The other, what's your opinion?

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 6:02

Yeah, it's a mix. Mix of several things. You wouldn't have this. Rights above 50 if you didn't it, if it wasn't for the policy in change, in, in ambition. But I think also that we've seen a bit of a similar gas situation as we saw in 2018 when carbon prices were just rising. The textbook example is when you have a higher carbon price, you will release emission reduction potential because of a higher carbon price. And of course you move to the power sector then first where you get this fuel switching taking place than from high emitting coal plants to less emitting gas plants. But now in Europe, you have had a really tight gas situation, so you really haven't had this additional supply to cater for additional demand from the. From the power sector, so carbon could go higher. And then gas has moved higher as well, because they don't, you have to have kind of a high gas price in order to not trigger this switching price. Carbon could really go higher also because you didn't trigger any emission reduction in EUTS in the short term. So I think it's a mix between different factors. As Trevor also mentioned, increasing interest from investors. So of course that amplifies also the move that we have seen in carbon.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:16

Absolutely. Trevor, you had a recent note where you said, you actually seen increase in coal burn and then, and in order for now, 'cause the gas storage is at such low levels, you have to have a. Increase in prices to incentivize gas storage is that's what's going on here as well.

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 7:30

Yeah, one of the interesting thing is we've had a doubling in carbon price and you're gonna get higher coal fire generation this year on year. And that's because, we've said this for a long time, is it's not the carbon price that drives short term abatement in power. It's the gas price that drives short term abatement in power. And the gas market's exceptionally tight. Ingle. I mentioned that, and it's a combination of, we had a very cold year, cold winter, and then we had a cold spring. And we start we came out of March, I think EU wide, probably 25 BCM short on inventories, and now we're about. 33 BCM Sure. On inventories year on year. It has gotten worse and it's gotten tighter and that gas market has moved up and is, in competitive terms against coal. It wants to engender the gas to coal switch because it wants to prioritize, injections into inventories. And that's exactly what's happening in the gas market. So every time the carbon price goes higher. The gas price has tended to follow and today, we're seeing a big sell off on gas. A little bit of that is carbon. Quite a lot of that is news coming that Russian flows might not stay as low as people expected just because the the sanctions approach by the Biden government seems to be weaker than. Expected, that might mean Nord Stream two could be on, by the beginning of q4. And that does change the supply and de demand dynamics in the gas market quite significantly.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:49

Your Honor, what you mentioned the correction and gas prices as Trevor does here, what's your view going forward here? Is this likely to continue in, into the summer and beyond?

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 8:57

I think it's important to note also just as speculative positions are transitory, so are also the coal to gas differentials. Because, coal and gas prices fluctuate over time and suddenly we have a cold winter. It gets really tight on gas in Europe. And then we have this strong increase in oil prices driving up the LNG prices in Asia. And then you have really a bullish drive on LNG in Asia. On top of that, with LNG prices trading at differentials, way above normal differentials to oil prices and given that you have a tight gas situation in Europe. Most definitely. Then the LNG is the marginal import price. And that's the sort of what happens in Asia on LNG is certainly hugely important for gas prices in Europe. And when I look about it, to start with, it was the oil price driving of LNG prices globally. And then later, they had their own British life driving even further. Than the oil prices, and now we see a correction in Japanese energy prices and a correction in European TTF prices as well. And then also a correction, a strong correction in carbon prices. And what's the chicken and what's the egg can be discussed up and down, but. The biggest move here has been the oil price to start with. And then on top, a British rally in Japanese LNG driving everything up and, you add in a cold winter as well, and then no inventories in the eu and you have some additional British salt and pepper on top of that. But all of this is transitory. The real fundamentals in the carbon market is politics number one, and technology, green tech number two. Those are the real big politics real big fundamentals in the carbon market,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:28

Ingvild Trevor mentioned that it's very hard in, in these very volatile times to be an analyst and to make these kind of forecasts. I'm sure you, you all three would concur with that. But I just wanna ask you about, what does it do to your forecasts? Have you changed your forecasts? And what is your kind of view for the coming weeks?

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 10:45

Totally agree with Trevor that guessing that the price would be. Touching 57, almost just slightly out in May. We wouldn't have seen that when we passed New Year's. So of course that makes it tricky, especially in the short term when now we haven't really we just only seen press go up. We haven't seen any corrections until kind of two last days. Even though we have huge corrections yesterday, Tuesday and today, Wednesday. It's still the price level that we passed just a few days ago. So of course that makes it tricky. And it's also trying to dissect the parameters or the factors that are important for the market because I think, we all have been in the market for a long time and we clearly see that the market dynamics have changed drastically, just the few last years. And of course. These factors that was like hugely important for the carbon market like few years ago. There are maybe not that important anymore. And also how the market is assessing the policy risks are completely different. Like few years ago before we had the phase four review, that was the policy risk was considered as like huge. And now you have this, you will have a big policy discussions this summer that kicks off really this summer. And it seems like the market has. Very much priced in quite a bullish case. You have the overall target that is agreed, at least 55%, but it's factors there that will be of huge impact for the supply and demand balance up to 2030. That will kick off the policy debate around the those issues. So it's hard to say, but I think going forward, one, you have the European Commission that will come forward with their policy proposal on how the framework should look like mid July. So that's one factor that can be. Kind of steering prices to both, and I guess because first the market will dissect what is the proposal by the commission and then you will have voices from member states, policy makers in the parliament that will start this vocal discussions, I guess on their key things that they want to discuss. And also we'll have the free allocation. 2020 will be handed out. So that's coming out now in, we don't have a date yet, but I think it will be now in, in the end of q2. I, it's at least the national allocation plan will come out. And of course this is supply coming to the market as well. So even though it will be short or, it should be known. Mostly to the market that supply is coming. It's been known for a very long time, but it was surprisingly big support ahead of compliance that the allocation was not handed out. So I think these two things will be important. And of course, we started off by discussing the gas market. So of course, movements. In the gas market will be a key factor for also to watch out for the carbon market.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:33

So if I can pin you down to a number then Ingrid, would you say 45 50 or will we what? What kind of range are we talking about here?

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 13:39

Yeah, I think we'll go below 50 guess. Yeah. Some somewhere in that range, but it's also tricky when it's passing, you really don't know what's the new support levels or what's a new floor price when you start seeing this big, buying from industrials for instance, what do they see as their target price?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:56

Absolutely. Trevor, what's your view here going forward? It was highlighted the policy discussions that are gonna happen in July and some of the other fundamentals. What's your view? Do you often have to change your forecast? Do you revise them up or down? In this kind of s situation?

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 14:09

Daily. Richard. Daily. Richard, excellent. Yeah. Yeah. We were calling 50 as the top of the rally just because there was this huge spike. Open interest at strikes of 50 and what we saw like back in 2018 was we certainly saw, a lot of trading around the 20 strike, and volatility around that. But the market went up and then stabilized around 20 with a lot of oil and we thought maybe that would happen with 15. Now there is. And since we, we called that, of course we've driven way past 50 and now we're coming back to it a bit. I think there's two things here really to look at. There's one, the kind of the short term fundamentals, right? And those are the things that Ville was, some of the things Bil was talking about. Certainly. The fact we haven't had free allocation yet for phase four, has deprived the market of a bit of liquidity on the sell side. The UK hasn't had any liquidity, and that's beginning to start and we think a lot of the UK installations have been holding EUA hedges to hedge their carbon exposures at the moment. So yes, it comes in quite slowly, but it should release as well a bit of selling. So there's a number of those kind of short term fundamentals. That will be important. But what we've seen in the harder bit to call is, does the influx of investor money still come into this market? Because if the investor, if the influx of investor flows continues at the pace that we've seen, then of course it just makes a mockery of saying, of calling a level because, it can be so big. We have, if you look at, I would say the fundamentals over this year, maybe you're saying emissions are gonna be. 70 to 90 million tons higher, maybe something in that level, right? So emissions are gonna be higher. They're gonna be higher because of the coal to gas switch. They're gonna be higher because of the higher activity that we're seeing year in year from the industrial. So you're gonna see both of those go up. Now, if you put that in context of the kind of, open interest we've got in the money on calls in, the money calls at the moment are like 270 million tons. They. Dwarf whatever buying side you're gonna see from the compliance or even selling from the compliance side, right? That is just being dwarfed by what's happening in the investor flows and certainly, if you looked at the ice, commitment of trader data. Another good place to look at in terms of seeing what's happening to the structure, of holdings. I wouldn't say it's the best data source in the world. It's not always that stable. And it can tell you very different things from week to week. But generally, generally, basically what it shows is open interest from compliance. Guys are down. You probably expect that because A, all the UK installations have left. And B, the power sector, which is holding most of that open interest in derivatives. Is decarbonizing, consistently decarbonizing. So you would expect that. But the change in net length amongst the investment community is, has been significant, and that is a change in net length of, a hundred plus million tons. And that's where, that is why we're above 50, is because you've had so much investor money come into this market. And if it continues at pace, then. We will just see upside from here. If it comes off, then we probably stabilize around 50, and which of those too is incredibly difficult to call because we just, you have very little sight on what the investor community is gonna do.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:36

Absolutely.

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 17:36

Could I add in a comment here? Of course, Richard. Sure. So our. And, is for carbon to move to 75 euro per ton in q3. And that's quite simplistically on the back of oil prices moving higher into q3 which of course will depend on COVID-19 than Iranian supply. And a certain future. Our gen general take is get higher oil prices. Averaging like $75 in q3, sometimes at 85 and then just higher jazz price on the back of that and then dragging carbon prices higher. But, so that is of that part of it. But of course, the politics, this summary is going to be hugely important. And then back to the speculate is when Erman is commenting on the carbon market trading at 50 and slightly above, saying we need much higher CO2 prices to get where we need to go. That is an extremely brilliant statement in my view, from one of the key politicians and could also be some guidelines for what we should expect coming outta the revision this summer in July. And probably a British view and with all the politicians stating all the things they want to get done by 2030. And then the market, or a speculator or fund should ask themselves, is 50 euro really enough to get us there? By 2013 with these massive reductions every year, and I think the probable answer is that 50 is not enough to get us that far, that quickly, and then adding in the bullish politics I would bet that the speculators are still bullish at 50 in that respect.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:06

Yeah. Ingvild, can I bring you in here? Yeah, please. Yeah.

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 19:08

Yeah. I would really like much to comment on this, the, of course prices, because I think, even though Erman says. He won't 50 is not enough. I think you have several policy makers that okay not necessarily saying that 50 isn't the bad carbon price, but I think when you see how far. Or how the price rise have been since November, that this is quite difficult for emitters in the EU that needs to be in this market for compliance reasons. And I also think that, you can say that of course you need a higher than 50 carbon price, but carbon price of 50 won't trigger much abatement today. You have the possibility if you have gas in the power sector. To trigger these abatement. And we saw that in 2019 when prices were hitting 25 and you had low gas prices, that emissions were dropping 9%. And that was, came mostly from the power sector. But then of course, what about for industry players? They will need a longer lead time to do their investments. They will have to invest in, in technology that are not available to me. Today. And of course, I mean you see already politicians from Spain, from Denmark, which is considered as green. That kind of this price increase that we have seen so far this year is a problem and is a problem for kind of the emitters and those that actually need to be in this market that doesn't have kind of the option of leaving or go going forward. So I think if we see prices just rallying and continuing rallying up to 70, 75, then I think that will be harmful for the policy debate that will take place. It's a lot of the factors that needs to be fleshed out. You have the overall target, so you know, cap needs to be tightened. For instance, the marketability reserve. And when you had the previous review, you wasn't supposed to touch the marketability reserve and then you were discussing policy when it was at a really low price level, and then you said okay, we have marketability reserve at hand. We can double the intake rate to tackle the overp. We just published our annual carbon market survey where participants believe that this 24% intake rate to MSR how much of the surplus in the market that you will soak into this. This reserve will continue at 24% after kind of these first five years. It's supposed to go back to 12%, but of course, this is at jeopardy when you are having a completely different price level. Because policymaking is not made in a vacuum. So I think if you see prices rallying, and especially if policymakers are pinning this to speculative activity to financial investors, that, that kind of, this will hit. And the European power prices, and you will also kind of, if you have industry players saying this is harmful to us, then that could also influence the policy debate.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:52

So if you get this chorus of voices putting pressure on the policy makers, if prices, continue to remain very strong, then you could see maybe. Although Timmerman said that there wouldn't be any market intervention, maybe there could be increased calls for that. Ingvild, is that what you are saying?

Ingvild Sorhus, Lead EU Carbon Analyst, Refinitiv: 22:08

So Timmerman, of course that could be an indication that the commission will won't put forward, that you will have a in market intervention, but it's not Tim Erman who's deciding this. He is representing the commission. And the commission put forward a proposal. This will be up to the member states, politicians in the member states and in the Parliament. So even though kind of that's the recommendation and that Tim Ruman says that, but if kind of policy makers and enough policy makers think this is a problem, then you will see the proposal will be changed or could be changed. And it will for sure be part of the policy debate, even if the commission is not proposing this.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:43

Trevor, I just, before we enter today, I'd just like to talk a little bit about these speculators, these investors that are coming in. Who are they and are they here to stay or is it gonna time for a sort of quick buck and they move on?

Trevor Sikorski, Head of Natural Gas, Oil and Carbon Research, Energy Aspects: 22:54

Yeah, no, I think that's a good question.'cause that's, that's the big, that's the big driver and I think, there is a lot of new money coming in and, it is a, there is a lot of hedge funds getting involved in this. Proprietary investors and we put out a, a piece a while ago called the carbon supercycle which kind of said, here are all the reasons for investing in carbon. And you look at, the kind of debate that emerged in 2020 and the, 2020 really became all about, massive increases in carbon emission reduction ambition on a global scale, right? You had, you already had Europe pleading, but then you saw, a big increase in, in us ambition, a big increase in, in OECD, Japan, Korea, a big ambition of course in, in non OECD with China. So you saw it. This huge increase in China and lots of talks about the energy transition and what that means. And one of the questions if you're an investor is how do you trade the energy transition? You know what? Commodity looks good. How do I get exposure to all of this ambition? Globally. And yes, you could say there's a few metals out there that maybe look good, because they will be needed as part of the transition. You can't really trade oil. You can't go long oil, you can't go long gas, you can't go long, the usual commodities. So you may be left, maybe trading a bit of equity, but of course you have company risk inside that. So maybe that's not great. So what looks good? What carbon looks great. Carbon looks like, the one thing that's guaranteed to get scarcer. You had an analytical consensus, certainly around the eu ets that carbon prices were gonna go up, right? Maybe, analysts differed a bit on the timing, but everyone was saying prices are really gonna go high because of the green deal, right? So this just looks like, a market that was a structural book and really calling out for investors saying, we're here. And of course as that happens, and some of the things that you know was being alluded to. Also begins to happen. So you look at, the price of EUAs going up. This has real world impacts, right? All of a sudden it's changing. Power prices and as you go from, free allocation, which is all about not passing through costs to a carbon border adjustment mechanism, which it's all about passing through costs. Then all of a sudden the inflationary impact of the EU. Market becomes much greater and all of a sudden you get a whole bunch of people wanting to use the EU ETS as an inflation hedge, right? So expect more money to come in from there. We think that investors, because of all of these dynamics around, around policy making. And around energy transition. And net zero means that this money is probably gonna be here to stay. We have to get used to, as a market, a lot of investment money coming in, a lot of investment potentially going out. There will be a lot of I investor flows around this market and a lot more interest from investors and historically we've lived with. And so it is, when you're looking forward, and I think one of the. Challenges all of us is this, is to start to call. How much investor flow do we expect to come into this market to hold for things like being an inflation hedge note being, getting exposure to the energy transition. All of these things that carbon is gonna start to offer to to investors.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 26:11

Excellent. Bjarne, can I just have a final word from you? What's your view here on, on a carbon as a hedge against inflation?

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 26:17

If you look at the European economy, look at the amount of fossil energy consumed in the power sector, which accounts for 50% of the E UTS emissions it's 3000 terawatt hours worth of pre combustion fossil energy, and the total consumption of fossil energy in the EU plus UK in 2019 was 15,000 terawatt hours of fossil energy. The European economy, the EU economy is hugely fossil based economy. So as you drive up the CO2 price, you drive up the energy cost in the EU inducing energy inflation. So that's for sure. Just commenting on this this issue of political intervention in the carbon market, of course, politicians will intervene. It's a purely political market. They have intervened many times to prop it up and fix it in many different ways and to get rid of surplus and everything. And of course if a speculators corner this market and drove it to 200, 300 Euro per ton in no time. Of course politicians will intervene. No doubt about it. It's a purely political market. But I think one important question that that Trevor raised is, despair by investors looking for the new economy and where to invest ending up in carbon because we are all looking towards the energy transition, the new energy world, the new economy. But it's not there yet. Because it's not yet profitable. It's so profitable. But if you look at the EU to 2050 to do the job of decarbonization, in my rough calculation, you need at least like 250 billion euros invested in the power sector every year to 2050. And the question is, how do you release that? Those investments just. Lobbing into the market because that's what you need. You may need to make these things profitable. And I think this goes back to Tim Milman saying We need a much higher CO2 price. We need that much higher CO2 price to make it profitable to release this massive net investments needed to actually do the transition. If we just stay here. Yeah, it's happening on the margin, right?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 28:30

Guys, we are running out of time now and we haven't even covered the UK ETS, which is, which has had the first day of trading this week on this very day when we're recording with a lively discussion from this point, carbon reunion. Thank you very much, Ingvild, Trevor, and Bjarne, and I hope to speak to you all again soon.

Bjarne Schieldrop, Chief Analyst Commodities, SEB: 28:48

Thanks for having us.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 28:49

So listeners, you can now follow the podcast on our own Twitter account at ly named the Montel Weekly podcast. Please direct message. Any suggestions, questions, or let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montenews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye. I.