EUA falls sharply pressured by gas and coal prices

By Frank O. Brannvoll, Brannvoll ApS, Denmark

Still no fundamental or political news in the carbon market. The EUA prices followed the general market upwards and rallied from major support at EUR77 to EUR92 and now back in the middle EUR86.

In August the auctions will be lower than previous months, which may bring some support to the market.
In the EU manufacturers and households have seen demand destruction and savings on power demand, and as consumption has been lower, reducing the need for EUAs.

The EU has begun implementing the set-up of the CBAM by sending notifications to export countries outside the EU, on how to implement the CBAM, starting in October 2023 as reporting exercise “dry run” only. The importers of goods will be the responsible unit, first for reporting and later from 2026, followed with CBAM certificates.

At current gas and coal price levels, the EUA price is currently stuck between EUR80-93/t.

Figure 2: EUA front-year contract, December 2021-July 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 PTX and the US EPA has proposed to use these as elements for CO₂ reductions up to 2032 and 2040.

For 2023, Brannvoll ApS expects EUAs to stay within a range of EUR65-105 with an average of EUR90.