Carbon falling below EUR80 after larger auctions and lower gas prices

By Frank O. Brannvoll, Brannvoll ApS, Denmark

The carbon market has fallen below the major support of EUR80, pressured by a lower energy complex and shift to gas from coal as a higher spark spread has been lowering compliance buying. The auctions used to provide funding for renewable subsidies have increased, adding to the price pressure. In addition, industrial demand destruction has not recovered and several industries are running on lower production.

Starting in October, CBAM is expected to have an increased impact over the coming years when payments for export are involved. Trading from financial players has been more to the bearish side, unlike last year’s conditions.

On 6 November 2023, the carbon price is EUR76, just above the support of EUR75, but technical trading could enforce the trend and establish a near-term range of EUR72-82 until the December 2023 contract makes way for the December 2024 one, which is currently trading EUR3 higher – ie above the support of EUR78. However, the end of December 2023 will tell.

EUA front-year contract, November 2021-October 2023

The United Kingdom Allowance (UKA) has fallen to EUR42/GBP37, with a 44 per cent discount to the EUA. The UK will also face CBAM regulations.

Brannvoll ApS recommends that companies outside the EU-ETS start looking at CBAM-related risk and mitigation.

It also forecasts a range of EUR78-103 with an average of EUR95 for 2024 as new sectors start to be added to the system.