10. The Commitment of Traders report

Why do we need a Commitment of Traders report?

The Commitment of Traders (COT) report gives us insight into how investors are feeling about the market. If there's a lot of buying, it means people are feeling positive. But if there's more selling, it suggests a more negative outlook. By keeping an eye on the COT report, investors can make smarter decisions about where to put their money.

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European Energy Exchange (EEX) and the Commitment of Traders

EEX is the platform that hosts the EUA auctions every day. It is the venue that publishes the Commitment of Traders report for carbon markets every Wednesday.

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The  Commitment of Traders report categories 

• Investment firms (as per the definition in MiFID II);
• Investment funds (including those engaging in collective investments in transferable securities or managed by alternative investment fund managers);
• Other financial institutions;
• Commercial enterprises (commercial activities outlined in ESMA guidelines);
• Operators subject to compliance obligations (industries and power producers).

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What does the  Commitment of Traders report show?

The report shows the “net positioning” of each of the categories above. “Net long” means that the market participants are buying more EUAs than the volumes that they are selling, showing a positive market sentiment. On the other hand, if they are “net short”, investors believe that prices are about to fall, so selling more carbon allowances. 

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The EU ETS  Commitment of Traders report in 2023 and 2024

In August 2023, investment funds consistently held a net short position in EUAs for 33 consecutive weeks - at the same time, there was a 34% decrease in EUA prices. Throughout 2023, they had an average of 27.8 million contracts in long positions and 36 million contracts in short positions. Currently, they hold 35.7 million long contracts and 65.3 million short contracts in short positions, still having a larger-than-usual net short position.

In March 2024, EUA prices showed signs of recovery for the first time in nearly a year, increasing from €50.60 to €59.58 between February 24 and March 19. During this period, investment funds reduced their short positions for three consecutive weeks (-25% in short contracts), and at the same time there was a 17.7% increase in EUA prices.

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