This newsletter was published 6.10.2021 at 18:16pm CEST

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

Soaring energy prices have reached concerning levels where they might cause serious harm to households and industries. The main problem might be tight supply side, especially on gas markets, which has been the driver of the recent price action. Gas prices have initially doubled this week, before crashing back down in Wednesday’s afternoon trading. Power prices were increasing almost in parallel with gas while carbon did not react to the broad energy complex moves. Many market participants who are trading relative spreads between different energy markets have been squeezed and might have to liquidate some of the positions to meet margin requirements. Market stress got amplified with exchanges increasing margins on top of higher prices which significantly increased the cash requirements for maintaining positions. Cal-22 German power prices have almost doubled in September alone, pressuring politicians to discuss possible interventions. With winter around the corner and energy prices so high, there is not only a risk of increased power bills but also power blackouts. Greece has suggested auctioning additional EUA allowances from the Market Stability Reserve to raise cash for dealing with the energy crisis. However, this is unlikely to realize as it would need lengthy discussions and approval from other member states. Theoretical solutions could be increasing gas supply from Russia or cutting industrial demand, which might cause serious economic crunches. We can expect further solution proposals, and thus volatility, in the coming weeks.

German power prices are up by 17.25 EUR since last week, with the front year contract trading at 140.50 EUR/MWh. API2 coal prices are down by 6.50 USD since last week, with the Cal22 contract trading at 143.00 USD/tonne. EUR/USD is down by 70 points since last week and is currently trading at 1.1540.

Price development of EUA Dec2021 futures contract