What Is Backwardation in the EAC Market?

Backwardation is useful trader jargon. But for EACs, it does impact renewable energy procurement strategy, which in turn affects corporate sustainability outcomes. Also important is how backwardation applies uniquely to the Energy Attribute Certificate (EAC) markets, where it can tell us a lot about the market’s status as a whole. With conventional assets, backwardation has a simple definition. It occurs “when a commodity's current spot price is higher than its futures contract price, resulting in a downward-sloping forward curve”.

But in the context of EACs, backwardation also occurs when an EAC’s current spot price is higher than the price that appears in future or forward contracts, which means current vintages are showing higher bid/ask levels than later vintages . However, because the commodity (an EAC) in question already exists as an annual instrument, the year (e.g. “2025”) is an attribute fundamentally attached to the EAC itself, with different years getting priced separately in the market by default. So when discussing backwardation, it must be understood in the context of future vintages (e.g. “2026” or “2027”), rather than the exact same asset being worth less in the future. Current vintages, inevitably, won’t be valid for use after their cancellation deadline. If expiry is still a point of confusion, get more information on lifetimes, and expiry in our article on the topic here. As for observing the “backwardation” visually, it is always visually apparent; the price curve appears to slope downward as the vintage rows progress.

Example price backwardation table ( data purely illustrative ):

Why can a current-year EAC cost more than a future one?

1. Disclosure Deadlines: An EAC’s usability depends on whether a deadline has passed (see all disclosure deadlines here ) so as deadlines approach, demand for immediately usable vintages can spike due to unpreparedness. As a quick reminder: In Energy Attribute Certificates (EACs) , every unit has attributes that cannot be changed: including year of production, meaning that a cheaper future certificate cannot fix an inventory gap for the current reporting year.
2. Standards Uncertainty: On top of this, procurement standards can change, with a recent example being the GHG Protocol’s draft Scope 2 revisions . For this reason, any new deviation between standards, or any major standard introducing new guidance regarding permissible renewable “ matching ” logic, can spook buyers. When standards change, you don’t want to be the counterparty left “holding the bag” in a forward contract for unusable GOs. Therefore, buyers avoid making assumptions about the standards that govern the usability of EACs: how they look now might not be the same in 6 months.
3. Unclear Future Consumption: When working with projected consumption figures that are likely to change, it can be quite difficult to accurately match for specific EAC needs like independent criteria schemes (e.g. EKOenergy ), or sub-annual matching. Of course, there are many buyers who do accept a level of uncertainty, hedging their future EAC needs with forward purchasing. But for very complex orders, sometimes you can’t plan so far ahead.
4. Project Supply Boom: New tranches of production being added to the market and outstripping increases in demand can lead buyers to take a negative view on future price movement. Oversupply is a common theme in the EAC market, and if it has a predictable starting point in the future, this will be reflected in the forward curve.

All of these factors, especially when overlaid against fundamental price drivers like regulatory uncertainty or the impact of weather on supply , can cause backwardation. It’s simply the market suggesting that today’s scarcity premium may not persist into later vintages.

How does backwardation impact EAC trading?

Usually, backwardation is simply a read on near-term scarcity, and depending on the time of year, a market in backwardation often reminds buyers they are approaching a particular deadline (or set thereof) from a country with outsized levels of net EAC imports (e.g. Germany ), where buyers often compete for valid supply nearing deadline season. The reverse of backwardation, contango, points to looser near-term conditions and stronger expectations further out.

Where can I trade GO forwards and futures?

Now that you understand backwardation, it’s time for an overview of relevant trading venues. First and foremost, Soldera offers GO forward markets using volumes from more than 4,000 renewable energy producers on our platform, enabling direct market access to deep liquidity. Alternatively, EEX's GO futures market offers a futures experience (but remember, with futures, you’ll be trading transferable, standardised contracts that are usually not customisable, unlike forwards). For more detail on the difference between forwards and futures, we’ve done a more detailed write-up here .

But remember: GO trading carries extra complexity beyond price risk. If you plan to cancel, you need to know whether the EAC being traded is valid for the claim you or your client is looking to make. Soldera’s platform provides hosted accounts in every jurisdiction for compliant local EAC cancellations where available, as well as filtering certificate inventory against the exact regulatory standards that you need to adhere to, long before you execute a buy order. Soldera also ensures you have the auditable exports and evidence behind your cancellations, crucial for any renewable energy buyer looking to place trades dynamically - you need a system that handles paperwork and the audit trail in the background. If this sounds right for you, book a demo to explore the platform.