This newsletter was published 25.1.2023 at 17:28pm CEST

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

Yesterday EUAs experienced second largest drop in price in absolute terms in 2023 thus far, as global gas prices plunged at the beginning of present week. Relatively high gas reserves and news of resumed LNG exports from Freeport have shaken gas markets and subsequently affected pricing of power and EUAs. European energy markets at present remain highly correlated and EUAs could continue to be volatile based on cheaper gas and still historically relatively high power prices. What’s more, legislators are considering a shift of annual compliance deadline towards September 30 next year, due to delayed free allocation in 2023. The reason behind potential shift lies in additional administrative work that installations need to do in order to report annual emissions. As legislators appear to acknowledge, reporting requirements are making it impossible to achieve already set timelines and are therefore considering extension. Such a big change could provide some relief to compliance companies, as they could wait for lower prices and plan their cashflows accordingly in challenging inflationary economic environment. Daily trading volumes are consistently picking up, with yesterday being the busiest day in 2023 so far. Almost 18 million allowances changed hands in Dec23 futures contract alone without block trades, while a lot of activity took place in daily/monthly spreads as well.

German power prices are down by 8.50 EUR since last week, with the front year contract trading at 165.50 EUR/MWh. API2 coal prices are down by 31.00 USD since last week, with the Cal24 contract trading at 145.00 USD/tonne. EUR/USD is up by 30 points since last week and is currently trading 1.0870.

Price development of EUA Dec2023 futures contract