Carbon Weekly Newsletter

This newsletter was published 1.3.2023 at 17:34pm CEST

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

A few days after reaching new all-time-high, carbon started consolidating at around 100 EUR per tonne. All selling pressure was quickly absorbed by buyers, while sellers emerged when EUAs moved above 100.50 EUR. Neither side has been too aggressive, and market seems to be well balanced, especially since such high price levels turned away speculative buyers and compliance entities who are able to wait for a pullback. However, demand for spot EUAs has been elevated since early February, which could be aligning with start of compliance buying and hence strong participation on daily auctions. Cover ratios on those have been steadily above factor two, regardless of market price. A bit less interest has been observed in the last two days, when front contract settled just above 100 EUR for the first time in history and yesterday, when it settled a few cents lower. Today, Polish auction offered some discount below secondary market and triggered quite aggressive selling, which resulted in correction of around 3 EUR. Selling might have been amplified by final decision of European authorities which now can schedule calendar with increased auction volumes. Another factor contributing to a slight pullback could be unwinding of long positions in carbon due to persistent bearish trend in gas and power. EUAs have been supported exceptionally well in relative terms to gas and power. If market would be to start turning around, high relative and absolute level of EUA could mean that a correction to the downside could be substantial as well. Despite all the reasons, one should consider that EUAs might be at least slightly supported, due to compliance buying until late April.

German power prices are down by 6.25 EUR since last week, with the front year contract trading at 146.75 EUR/MWh. API2 coal prices are up by 14.00 USD since last week, with the Cal24 contract trading at 158.00 USD/tonne. EUR/USD is up by 40 points since last week and is currently trading 1.0670.

Price development of EUA Dec2023 futures contract

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