This newsletter was published 8.2.2023 at 18:14pm CEST

The current prices on the European carbon market are as follows:

EUA prices have backed down from the strong rally that started a few weeks ago. All-time highs were within reach last Wednesday, however EUAs stopped just 4 EUR before that, at around 97.50 EUR on December 2023 contract. Reversal was swift, with prices already losing 6 EUR the next day. The weakness was partly attributed to tomorrow’s European Parliament environment committee vote on reforms. This would frontload around 250 million EUAs from the MSR until 2026 and bring more supply to daily auctions. Revenues would be used to speed up green transition and move away from Russian fossil fuel dependence. Another reason for fast reversal could be the end of short squeeze as it was seen from the commitment of traders report. Data showed that investment funds that were previously net short around 9 million EUAs three weeks ago, bought back back all those shorts and ended up long by 1 million EUAs. Changes like this have material impact on the market. One sided interest coupled with relatively empty order books mean that ranges of those moves can be extreme. With temperatures warming up again and the coldest part of the winter behind, selling pressure could start building up again in all energy markets.

German power prices are down by 21.5 EUR since last week, with the front year contract trading at 163.5 EUR/MWh. API2 coal prices are down by 18 USD since last week, with the Cal23 contract trading at 135 USD/tonne. EUR/USD is down by 190 points since last week and is currently trading 1.0730.

Price development of EUA Dec2023 futures contract