Carbon price collapses due to political uncertainty and speculative pressure – major support tested

By Frank O. Brannvoll, Brannvoll ApS, Denmark

Sharp falls were seen in the European carbon market, as several political factors from demonstrations and political uncertainty hit the market during January and February. This, in combination with the ongoing lower energy complex, especially gas and coal, has sent the price for the Dec 24 contract to EUR60, the lowest seen for years. Speculators have also been seen to shorten the market as large auctions to finance the Repower EU funds are being offered.

On 6 February the EU published new ambitious targets, focussing on 2040 instead of 2030 to have a 90 per cent reduction in CO₂ emissions when compared to the 1990 baseline. However, as this is expected to pass through the European Parliament following its summer elections and with a new commission handling the issue, some analysts fear the growing resistance towards very harsh climate targets could reduce the political support for green transition.  

In a major poll future prices were adjusted downwards by 20 per cent to 2030.

For the cement industry the good news is that focus is shifting towards support for CCUS for potential enhanced support – a major part of the cement sector’s roadmap to 2050. CBAM will further enhance this focus as regions will start creating CCUS hubs and new emissions trading systems will be implemented, including that of Turkey by 2025.

EUA front-year contract, May 2021-February 2024

The carbon price collapsed by 18 per cent to EUR62, down from the EUR76 or testing a major support. It is now at EUR60 with an expected range of EUR58-68. The UK Allowance Dec 24 (UKA) has fallen to GBP36 (EUR42), stable at 32 per cent discount to the EUA, down from 50 per cent in October. Brannvoll ApS forecasts for 2024 a range of EUR70-95 with an average of EUR88 for the Dec 24 contract.