This newsletter was published 15.3.2023 at 16:58pm CEST

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

Nearing of first quarterly option expiry in 2023 and liquidity issues that have hit banking sector have sparked massive market activity and increased volatility in carbon markets as well. EUAs have plunged from 100 to 90 EUR in only three days and is as such the most volatile change in pricing thus far this year. Those moves might have caught many participants by surprise, especially since we are in compliance buying season, which has been historically supportive of the market. During the past few months, prices very rarely traded below 90 EUR on spot market, which might be indicative of several buyers waiting to accumulate at this level. Despite mentioned reasons, interest on daily auctions has decreased by a fair margin, since all of them this week offered some discount below secondary market. A big surprise was yesterday, when auction cleared roughly 70 cents below prevailing spot prices, with number of bids so low, that auction barely cleared. This was also auction with lowest cover ratio year-to-date, which has usually been a bearish sigh. Risk-off mode in all global markets will certainly test the resilience of EUAs. Crude oil prices are down 50% since highs twelve months ago and whole energy sector is being dragged down with it. Cost of carry trade has gone down significantly as well, since world bond markets experienced drop in yields as a result of uncertainty in macroeconomic environment. It seems that higher interest rates have only recently started reflecting in economy and uncovering issues in several sectors.

German power prices are down by 4.30 EUR since last week, with the front year contract trading at 135.25 EUR/MWh. API2 coal prices are up by 3.00 USD since last week, with the Cal24 contract trading at 131.00 USD/tonne. EUR/USD is down by 40 points since last week and is currently trading 1.0520.

Price development of EUA Dec2023 futures contract