EUA falls sharply pressured by gas and coal prices

By Frank O. Brannvoll, Brannvoll ApS, Denmark

The EUA price saw a sharp drop below EUR80/t to major support at EUR77/t, pressured by lower gas and coal prices. After compliance buying ended in April, investment funds now have the largest short position since 2018.

Following a new round of cuts by OPEC+, gas and oil prices lifted.

While there has no political news, the market expects a tightening of the EU’s carbon reduction target to 75 per cent in 2040, replacing the current target of 55 per cent in 2030.

The EUA price is currently stuck between EUR80-85/t in the short-term and between EUR77-90/t as long as gas and coal prices are at the current levels.

EUA front-year contract, December 2022-June 2023

In the UK, the ETS system saw its price fall and widen to EUR24 below the EU ETS for December 2023.
New carbon uses thanks to CCS and CCUS may open new opportunities for the cement sector and shift the focus to longer-term carbon pricing in the ETS as well as avoiding carbon taxes. It is possible that a new market will develop within CCS and CCUS.

CBAM will be a “dry run” until 2026 so no real impact on market prices is forecast in the next three years. However, preparation for its implementation is expected to begin in the run-up to 2026.

Brannvoll ApS expects a range of EUR60-100 with an average of EUR85 for 2023.