The carbon allowance purchasing strategy of ETS operators must evolve to tackle the dual threat of shrinking allocations and an increasingly volatile carbon price.
This is a critical time for businesses covered by the UK ETS as political, geopolitical and economic uncertainty continues to rumble.
The UK Emissions Trading Scheme (UK ETS) has now been operating for 6 years, and over that time we have seen significant changes to policy, talk of a wider EU ETS link and an influx of investors and traders active in the market.
All of this has had a significant impact on the UK Allowance (UKA) price.
Added to this price volatility, free allocations to industry are being reduced from 2027 and phased down year after year to 2030.
For the UK's largest industrial companies, this combination of threats is turning carbon compliance from a manageable line item into a growing, less predictable call on resource and working capital.
Increasing budgetary pressure and active purchasing strategies can put strain on balance sheets. Carbon allowance procurement is a unique product traded via in an inefficient market that is often not well understood.
CFP Energy helps procurement, treasury and finance teams get ahead of that exposure and make smarter procurement decisions.
We combine specialist ETS market expertise with solutions that offer flexible credit and disciplined cash management.
The goal is that compliance costs are forecast well in advance, funded efficiently, and never a surprise to budget availability or the balance sheet.
CFP Energy provides a single point of support covering compliance strategy, market access and, critically, a portfolio of credit and cash management structures that keep the cost of compliance off your balance sheet in the short term, frees up your working capital.
|
FREE ALLOCATIONS Falling
Annual reductions mean a growing share of every tonne emitted must now be bought in the market. |
ALLOWANCE PRICES Rising
Higher prices on a larger open position mean bigger, less predictable cash outflows. |
Using the EU's latest benchmarking data alongside your own historical emissions, we help you predict what your free allocation is likely to look like for years to come giving treasury an early, reliable view of the allowance shortfall that will need to be purchased.
We combine supply and demand analysis from leading UK ETS analytics providers with your emissions and allocation forecasts to model your likely compliance costs in future years, so budgets and credit lines can be set well ahead of need.
Risk management strategies that sit alongside — and complement — your existing energy and commodity purchasing strategy, rather than operating in isolation from it.
Full access to primary and secondary markets, including spot, futures and options, giving you the flexibility to build a position in the way that suits your risk appetite and cash flow.
Contact our team, here.
Contract with confidence
Simplified, standardised contracts backed by our in-house legal team, so agreements are put in place, and resolved quickly, without tying up the treasury or legal resource.
Active risk management solutions and dedicated credit lines take the pressure off internal resource day-to-day cash management, allowing ETS compliance costs to be hedged efficiently.
Alongside this, flexible payment structures let you dictate when you buy and when you pay, in the most cost-effective way for your business.
Turna rising and unpredictable liability, into a planned and controlled cost.
Our systems work alongside your ERP platform e.g SAP Ariba, Coupa for easy onboarding setup and settlement, keeping treasury, procurement and compliance data in one place.
A dedicated carbon team
CFP Energy provides each client with a dedicated account manager for market insights, live trading quotes and any additional support you need.
As allocations continue to fall and prices continue to remain volatile, the procurement impact of UK ETS compliance will only grow.
The earlier an effective purchasing and cash management structure is in place, the more control your business has over when and how that cost is met.
Get in touch to arrange a short call and see how a tailored support package could work for your business.