EUA stuck in range trading – while UK price hits new low

By Frank O. Brannvoll, Brannvoll ApS, Denmark

Lack of political news kept the market in a range drifting slightly lower due to lower gas prices, fear of industrial demand destruction as interest rates kept rising, as well as weaker equity markets spilling into traders sentiment.

The European Commission has proposed that industrial companies must include emission reduction plans with five-year intervals up to 2050 to keep receiving free emission allowances. This proposal is currently under discussion.

The EU has begun implementing the the CBAM and Brannvoll recommends that companies outside the EU start looking into the business impact this may have as well as how mitigation and risk management may be beneficial as a support. The certificates will go into force in 2026.

Figure 2: EUA front-year contract, December 2021-August 2023

The EUA price is currently stuck between EUR80-88 and would need some “event to break out.”
In the UK the UKA prices have collapsed over several months and reached an all-time low at GBP40 (EUR47). The difference to the Dec-23 EUA price has widened to EUR36 as the market does not see the UK implementing rules as strict as the EU.

Brannvoll ApS forecasts a range of EUR65-105 with an average of EUR90 for 2023.