Environmental Market Rankings 2023-2024

Compliance carbon markets on the march

As sustainability policy continues to be ramped up globally, compliance markets saw a mass expansion and a scaling up of ambition, writes Genevieve Redgrave.

While the year was not a highlight for price performance in all markets, particularly within the EU and the UK, global momentum shows promising signs that carbon markets are on the rise.

This growth is seen nowhere as clearly as within the Asia Pacific region. While some compliance markets have existed in the region for some time, notably within China and New Zealand, there has been an explosion of announcements about new markets or a ramping up of policy.

Viridios Group – parent company to winners Viridios Capital and Pangolin Associates – said the year has been significant for the region, as compliance markets continued to evolve "with greater ambition, regulatory reform, integrity measures and price transparency [which have been] key factors in their performance".

Viridios Capital and Pangolin Associates won Best trading company and Best project developer for the APAC region, while Pangolin Associates won Best advisory/consultancy for the region.

Eddie ListortiEddie Listorti, Viridios group CEO, said "there is a growing anticipation from high emitters that the requirements will continue to tighten", adding that it also expects the region to play "a vital role in helping the world achieve its climate targets".

Major announcements from 2023 include India, which published plans to operationalise a cap-and-trade market for its highest emitting sectors within the next two years. While the exhaustive list of sectors has yet to be announced, this will include steel, aluminium and cement, covering roughly 15% of the country's emissions.

After launching its voluntary market in 2023, Indonesia also clarified plans for its compliance market, which will be introduced in three phases. It is currently piloting the market for coal-fired power plants but will continue extending the system to other sectors until the end of the decade.

Many other countries in the region also made moves to strengthen their compliance market throughout 2023, including Australia, which tightened its 'safeguard mechanism'. This puts a cap on large industry's annual emissions and requires the purchase of compliance credits for any emissions over this baseline.

Listorti said the market reforms "have laid the foundation for growth. Improvement to key methodologies and declining baselines are driving demand and prices".

Since the market reforms came into force, prices have seen a steady increase from AUD$26 ($16.99) per tonne in June to almost AUD$36 ($23.53) last month.

Neighbouring New Zealand also saw a year of policy changes, as it reduced the number of carbon units available at auction and laid out plans to increase the price floor between 2023 and 2028.

While it launched a more significant review into the design of its emissions trading system (ETS), a government turnover in the October election meant this got scrapped.

This led to a rebounding of price – rising from NZD$40 ($24.69) per tonne in July to NZD$72 ($44.4) at the end of the year. This however didn't last as prices dropped again at December's auction.

At the start of last year, all eyes were on China, with expectations the compliance market would be extended to include the steel, cement, building materials, non-ferrous metals, chemicals and petrochemical sectors.

This, however, is now likely to come into force in 2024, alongside integrity measures to improve confidence in the market.

Despite these delays, the Chinese market has performed well over 2023 with cumulative turnover hitting ¥11.03 billion yuan ($1.5 billion). Annual China Emission Allowances prices also reached ¥68.15 yuan ($9.47) – a 23.24% rise on the previous year, according to Viridios Capital.

North America

Jonathan BurnstonNorth America was also a key region for expansion in 2023, as Canada and New York both started to develop plans for their own compliance markets, and Washington finally launched its much-anticipated cap-and-trade market.

Canada – which has been home to provincial markets for many decades – announced in December it would be developing a federal cap-and-trade system for the oil and gas sector, to be phased in between 2026 and 2030.

Jonathan Burnston, managing partner of Karbone, said this will "clearly be robust", given the history of compliance markets in Canada. Karbone is the winner of Best broker, options & futures and Best broker, OTC/spot for California and Best broker for the RGGI market.

"On a provincial level, it has the longest-standing carbon programmes in North America, and Alberta has had a functional and meaningful price on carbon since 2007," he said.

Offsets in Alberta started with a price cap at around CAD$15 ($11.12) but now the cap sits around CAD$65 ($48.19), he said.

"While I wouldn't say Alberta's politics and programmes are going to define the broader Canadian system, I think it's a useful signpost", he said, adding that "it was always going to be a matter of time until there was a federal programme or at least enough provincial programmes that the job was being done anyway".

The tail-end of last year also saw New York State release an early framework on an emissions reduction programme which would require some sectors to buy credits if they exceed a pre-defined limit.

This was planned as a "cap-and-invest" market which would not create a secondary trading market. However, under the recently launched framework, businesses can hold or sell allowances they don't use. This has seen opposition from state legislators, who allege it would effectively create a secondary market and go against the aims of the system.

Its technicalities are therefore still being ironed out.

Michael BerendsMichael Berends, CEO and co-founder of ClearBlue Markets – winner of Best advisory/consultancy for the EU ETS, California and North America – said this is a market to watch closely and encourages emitters to "get ahead of the market, understand what they're facing, including both potential costs and opportunities".

He said it is also a positive signal of growing support for compliance markets in the US, following the launch of Washington's market earlier in the year.

While the Washington system was volatile because of high speculative trading, allowances were trading at high prices – as many expected. Its final auction in December saw allowances sell at $51.90 but had reached a high of $63 earlier in the year.

Currently linked with Quebec's auctions, it plans to also link with the California system.


Janet PeaceCalifornia's Air Resources Board launched its final climate scoping plan last year, which increased the ambition of its 2030 emissions target – which in turn determines the supply of cap-and-trade allowances.

While no specific changes to the ETS have been announced yet, it is looking at how to tackle the oversupply of credits and future offsetting this year – ultimately making it "more aggressive".

Anew Climate, winner of Best trading company, options and futures for California, Best trading company for RGGI, as well as Best project developer for California and North America, was pleased that "the scoping plan clearly signalled that the carbon market was a key driver of emission reductions in the state", but would have liked further details on offsetting measures.

Janet Peace, Anew's head of advisory, said: "California is a model of how cap-and-trade programmes should operate", it said, "but even California's programme needs certainty to function and drive investment".

Burnston said the California market is already "quite bullish and quite expensive" and he was "not too sure" what further intensification would achieve. He added: "California's economy is already heavily decarbonised, more than any other region in the States, and so it would just lead to more leakage" – whereby heavy emitters move to states with less stringent carbon pricing.

"Unless the bounds change and there's some sort of imposed downward volatility, it's tough to see what will stop the steady march upwards [in pricing]", he said.

Austin WentworthThis upward trend was seen throughout 2023, with allowance prices reaching "all-time highs" with "relatively low volatility", STX Group said. December's auction saw prices hit a high of $39 per tonne.

STX Group won Best trading company, OTC/spot for California and Best trading company for North America.

Austin Wentworth, head of North America at STRIVE by STX Group, added that "it is by far the most mature and liquid environmental market in the US".

He expects the price to continue performing well throughout 2024, saying that "interest in the market continues to grow and develop, with prices responding rationally to policy and [the market's] fundamentals".


Winners were positive about how the Regional Greenhouse Gas Initiative (RGGI) performed over 2023, with high prices largely driven by speculative purchasing and "supportive fundamentals".

The market was "particularly strong" in the second half of the year, hitting almost record highs of $15.25 an allowance.

RGGI however faced more uncertainty given the ongoing legal battles over whether Pennsylvania and Virginia will join – an issue which has rumbled on over the past few years.

"RGGI has its challenges, with a few jurisdictions seemingly discussing coming and going, but there's strength overall and prices are very healthy," Berends at ClearBlue Markets said.

Karbone's Burnston says the fact more states want to join is a bullish indicator, despite the lengthy and politicised process to get there.

An ongoing programme review into whether emissions are being reduced and improvements necessary was also due to be finalised in 2022, but signatory states have extended the deadline once again.

Wentworth at STX Group said: "this creates uncertainty over the mid-and long-term direction of the programme".

Despite this, winners were broadly positive about the system's trajectory.

"You can imagine where decarbonised energy has penetrated so far and taken up so much of the electricity dispatch stack that you actually start to see fundamental declines in demand because there are fewer thermal power plants," Burnston said, adding "But we're not there yet, and there's a lot of headroom left."


While North America has been a region of growth throughout 2023, many winners expressed disappointment that Mexico delayed plans for its own compliance market.

While it has previously carried out a pilot cap-and-trade programme, it has yet to operationalise the market, citing difficulties in creating the final regulations. The government said it hopes to launch within 2024 but further details have not been announced.

STX's Wentworth said: "There haven't been any significant updates or concrete timelines" but he argued that Mexico has a critical role in Latin America's energy transition.

Other winners were also concerned about how "politically charged" the negotiations are in Mexico and were not optimistic about progress in the short term.


Other regions saw further clarity on ETS policy throughout 2023, particularly the UK which released its long-awaited reform. This tightened the cap on emissions by 30% and announced plans to reduce allowances from 2024 onwards, which winners labelled as "ambitious".

However, the UK government also added 53 million tonnes of additional allowances to the market over the next three years to "smooth the transition". Given annual UK ETS emissions are around 105 to 110 million tonnes on the market each year, this announcement has been "very bearish on price", said Tim Atkinson, director of sales and structuring, at CFP Energy – winners of Best trading company, options and futures for the EU ETS and Best trading company, OTC/spot for the UK market.

Prices dropped to record lows of £31.30 for the December contract.

"There are understandable reasons why the UK ETS authority introduced these additional allowances", he explained, "as UK industries have had a pretty tough time over the last couple of years, so the government perhaps wanted to soften the blow of a dramatic cut to the cap in the short term whilst funding and technology challenges remain".

Tom LordTom Lord, head of trading and risk management at Redshaw Advisors, said the extra tonnes "do not change the ambition of the market". However, "to send a strong decarbonisation signal with higher prices, the UK government could have chosen to auction the allowances later in the phases when the market was tightening significantly".

"Alternatively," he added, "they could have been placed straight into the proposed supply adjustment mechanism to let the mechanism decide when they needed to come to market".

Redshaw Advisors won Best advisory/consultancy for the UK ETS.

The UK government is currently consulting on a Supply Adjustment Mechanism, which would remove allowances in circulation once an allowance threshold has been hit. Lord said, "should such a mechanism be introduced it will tighten the market and almost certainly push prices higher. How high and how quickly will depend on the final design".

The additional supply put onto the market by the government is contributing to lower prices in the short term and "ensures the market is building a surplus", Lord said.

Lord suggested that the "most influential factor" on price in 2023 has been supply catching up with demand. "The drip feed of supply via the fortnightly auctions means it has taken the UK ETS a while to build up enough allowances to satisfy forward hedging demand which comes on top of the annual emissions. The supply caught up in 2023 and tipped the balance of the market long".

High renewable energy generation in the UK and relatively mild winter also further depressed prices.

CFP Energy's Atkinson predicted that these low prices could be here to stay for some time, but it is likely we will still see some short-term volatility, because of the inherent limited liquidity in the UK market. Unexpected shocks – such as the war in Ukraine – or a sharp increase in demand caused by sudden drops in wind generation can often lead the UK market to have quite significant volatility, because of its smaller size.

The current lower prices, however, are a "very good compliance buying opportunity", Atkinson argued.

Lord added: "Where possible, people are certainly thinking longer term and buying extra. With an auction floor price at £22, there is a limit as to how much further the price can fall. The closer we get to £22, the more incentive there is to buy and to buy big".


The more established EU ETS also saw "significant volatility" over the course of 2023, with prices peaking around €105 ($113.9) in February before falling in the second half of the year. This hit around €70 in early December but stabilised around €80 by the end of the year, according to Michael Karavias, managing director – derivatives and structured products at Evolution Markets.

Evolution Markets won Best broker, options and futures and Best broker, OTC/spofor the EU ETS and Best broker, OTC/spot for the UK ETS.

All EU ETS winners attributed this to dropping power prices – which meant coal got "priced out" of the energy mix – alongside higher renewables usage.

Figure 1: Change in EU power generation. 

Source: Vertis Environmental Finance

Figure 2: Changes to German hard coal prices and how this led to a similar downward trend to EU allowances spot prices. 

Source: Vertis Environmental Finance

This drop in coal usage, combined with much lower industrial production led to a rapid decrease in power sector emissions – and in turn less EUA demand.

While Stefan Feuchtinger, head of market research and analysis at Vertis Environmental Finance, said he was expecting to see somewhat of a drop in emissions, the 25% drop from the power sector was "the biggest drop ever seen" and "really out of the ordinary".

Vertis Environmental Finance won Best trading company, OTC/spot for the EU ETS.

"Utilities are still the biggest factor of traded demand in the market, and their behaviour continues to impact the market quite a bit", he explained.

Karavias explained that these "softening fundamentals in the lower power sector emissions" caused a "dramatic sell-off" which means spot contracts are currently trading below €50.

Data indicates "substantial speculative shorts in the market", it said, "compounded by impending increased auctions and the extended compliance deadline to August, all contributing to the acceleration of the sell-off.

Feuchtinger predicted that the market will continue to see lower prices throughout 2024 because it is still cheaper for utilities to not produce with coal power.

CFP Energy's Atkinson similarly argued that "while there are always unpredictable events, overall, it looks like renewable generation will remain far higher this year. And industrial demand is not coming back anywhere near to what was expected after the reduced output in 2022".

Stefan FeuchtingerVertis' Feuchtinger said there is a big risk that if the power price doesn't increase again there will not only be less demand for this year but also a sale of allowances bought last year, which would lead to more supply on the market.

"There's a time window now, where maybe this year or the next the price could drop further because of the factors lining up on the downside".

While this is obviously a hit to the market, he argued that it wasn't necessarily bad for the EU if it helps it reach its emissions reduction targets. "And if the targets can be reached at a lower price, then so be it".

"This would be a good thing for most market participants, but it could turn into a bad thing if there is a complete implosion of price and it dropped to €10, putting the system into question", he said.

2023 also saw the EU provide further clarity on some of the policies surrounding its ETS, including an extension to the shipping sector, which comes into force this year.

Winners do not expect this to have a major impact on the market. Atkinson explained that shipping will equate to roughly 35 million tonnes of emissions in 2024, rising to around 80 million in 2026.

He said, "this is a very small percentage of the overall market so we're certainly not seeing demand from shipping that would cause the prices to rally".

The EU also announced plans to reduce the total amount of allowances by 90 million in 2024 and then a further 27 million allowances in 2026. Atkinson said this means it is likely that by 2027 onwards "we're going to be back near €100" – and so the market should make use of the lower prices in the interim.

The further policy clarity on the Carbon Border Adjustment Mechanism [CBAM] has also helped deliver more certainty to the market. ClearBlue Markets' Berends said: "It's always been a strong market, but the question is always what will the details of the policy be, and as those details are becoming clearer and clearer it helps give strength to the overall ETS as a whole.".

Winners were also broadly not concerned about the impact of the EU's elections in June on the ETS.

"It'd be naïve to say there's not any impact [of an election] because it is a policy tool," said Gordon Bennett, global head of environmental markets at ICE Group, winner of Best exchange/clearinghouse for the EU ETS.

However, "it's very clear that the cap and trade is the primary policy tool for the EU to deliver its environmental goals, with the introduction of maritime into [the second iteration of the ETS], he said.

"Many carbon market roads have links to the EU and it is set to continue to influence international carbon developments with the CBAM, the EU's carbon removals certification framework and even the Carbon Offsetting Reduction Scheme for International Aviation [the voluntary emissions offsetting programme for the aviation scheme], which has tacit links to the ETS".