Market Commentary

August Market Commentary

by Thornbridge

Commentary by Carbon Cap Management LLP – A Thornbridge Appointed Representative


Commentary by Carbon Cap Management LLP – A Thornbridge Appointed Representative

In August, major equity indices experienced negative performance with the MSCI World Index falling -2.4% (+16.1% Year-to-Date) and the S&P 500 down -1.8% (+17.4% YTD). The commodity markets also had negative returns with the Bloomberg Commodity Index dropping just over -1.2% (-6% YTD), Gold falling by almost -1.3% (+6.4% YTD) while Brent Oil rose +1.5% (+1.1% YTD).

Compliance carbon markets posted mixed performance during August with both of the US carbon markets dropping along with the EU market. The UKA and NZU markets were positive.


In the US, the California market action was characterised by profit taking during the beginning of the month followed by a rally in prices in the lead up to the auction. A strong auction result, with the highest ever market clear combined with strong road transport emissions led to strength in prices towards the end of the month but still finishing down -1.3%. In the RGGI market, the fundamental picture continues to look strong with higher emissions driven by heatwaves across the East Coast and the market preparing for news from the RGGI Programme review meetings scheduled for September. RGGI prices ended August close to flat at -0.1%.


In Europe, EUA prices dropped by just over -1.0% by the end of the month, in contrast to a historically positive August due to reduced auction supply. The fundamentals continue to indicate weak industrial output and weak power emissions. Strikes by Australian LNG workers caused a strong mid-month rally in EUA prices, which fell away after the strike action seemed to be resolved. The strike action had a greater impact on UKA prices, given the UK’s greater reliance on LNG, with prices in ending up +3.9%. However, further upside in UKA prices may be limited due to continuing bearish fundamentals and a lack of policy stringency from the UK Government.


The NZU market experienced another strong month of performance with prices rising almost +18% reflecting the market’s change in perceptions about the government’s price control levels going forward. September will be the last auction with a low-price floor of $33 as this floor will move up to $60 in December, with cost containment levels also set to rise higher in 2024.

Author: Alex Hackett

Alex a Business Development Manager and a member of the investment funds team and is involved in portfolio construction, regulatory reporting, trade surveillance and monitoring.

Author: Thornbridge