Carbon Weekly Newsletter

This newsletter was published 28.7.2021 at 4:05pm CEST

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

Recent attempts to push EUAs to 50 EUR mark have been successful, however short-lived. The market rejected lower prices and sharply recovered, having gained more than 5 percent in only four trading days. Gains were accompanied by strong auctions and steady bullish momentum in gas and power markets. Daily trading volume has been declining for the past few weeks, which is expected for slower summer markets. By the beginning of the next week the auctions will be halved until the end of August, as standard measure to keep market less volatile. Lower supply, combined with up trending prices of most important energy commodities and power, might cause bullish moves in the near term. Many analysts expect EUAs to continue to rise and even reach 80 EUR/EUA by 2030. Those projections could also be supported by current options activity, with the largest open interest sitting at 100 EUR with 46 million EUAs open interest. Although this figure seems far off reach at the moment, the market has already gained more than 60 percent in 2021 alone. Post pandemic recovery, increased investment activity and power needs, may provide additional long-term support for emission allowances. Year-on-year European power sector CO2 emissions rose by more than 10 percent, which could also be interpreted as a strong bullish sign. It may seem that electricity outputs from renewable sources could not provide enough power to substitute fossil fuel just yet. Continuous warmer weather, heat waves in Central and Southern Europe and potential lower hydro power outputs, might provide yet another reason for EUAs to rise.

German power prices are up by 3.40 EUR since last week, with the front year contract trading at 74.20 EUR/MWh. API2 coal prices are up by 2.00 USD since last week, with the Cal22 contract trading at 96.00 USD/tonne. EUR/USD is unchanged since last week and is currently trading at 1.790.

Price development of EUA Dec2021 futures contract

 

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