VEEC price volatility

23 Oct 2015

On 22 October, the VEEC market demonstrated how volatile it can be.  From seemingly nowhere, the price crashed by over $13 from the day’s opening price before recovering to $29.00, $6.40 below the day’s opening price of $35.40.

Reported VEEC spot trades, Thursday 22 October

Earlier in the week, the Victorian government released details of new activities and the revision of existing activities under which VEECs can be created.  This may have created some pretext for the sudden price fall however there was nothing in this announcement which should have taken the market by surprise.  Considering the future increases in the VEEC target and the common view that 21C creation cannot be relied on to meet the bulk of the 2016 target, a little additional creation should be no cause for a 18 per cent fall in the price.

A more likely reason for the sudden price fall is the rate of price increase over the past quarter.  Within three months, the price had risen from under $20.00 to over $39.00.  While there were some market fundamentals which supported a price increase, the extent of the rise surprised many.  With creation starting to edge above the target for 2015, there is some justification for a price correction.  The extent and speed of the movement however was unprecedented for any participant in environmental markets.


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