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This newsletter was published 22.2.2023 at 17:21pm CEST
The current prices on the European carbon market are as follows:
For the first time in EU ETS history, December 2023 futures contract breached triple digits on the back of persistent buying activity that has been going on for the past few weeks. EUAs have been in a bullish trend for the better part of this year, without any greater pullbacks, despite confirmed frontloading of emission allowances sales in mid-term. EUAs will be sold in value of 20 billion euros, which will be used for transition away from Russian fossil fuels. The EU Council has adopted the suggested REPowerEU proposal, however the exact calendar of increased auctions and the volumes is still unknown. So far, market has not reacted negatively to the published news, suggesting that timing of sales would be more important to determine short term prices. A factor that might be also affecting bullish narrative in carbon prices, could be selling of power and production hedging. With coldest part of the winter behind us, risk of energy prices spiking extremely has waned, therefore incentivizing power producers to sell their power forward and buy EUA in tandem. EUAs have been well supported by consistently strong auctions and good participation, despite high absolute prices. EUA spot prices, however, fell short of all-time highs, reached during halved auctions in August 2022. Reason for this is that cost of carry jumped up significantly in comparison to last year and is at the moment higher than three percent per annum. In previous years the difference between spot and futures prices was much lower. With further interest rate hikes expected from central banks, the spread could widen even further.
German power prices are down by 8.25 EUR since last week, with the front year contract trading at 153.00 EUR/MWh. API2 coal prices are up by 9.00 USD since last week, with the Cal24 contract trading at 144.00 USD/tonne. EUR/USD is down by 50 points since last week and is currently trading 1.0630.
Price development of EUA Dec2023 futures contract