European carbon values declined in the week ending Nov. 1 due to falling gas prices. Demand remained lackluster amid bearish fundamentals and weak technical signals.
Prices briefly rose sharply on Oct. 29, but EUAs lost technical support as the week progressed.
EU Allowances were trading at Eur64.33/mtCO2e ($69.92/mtCO2e) at 1148 GMT on Nov. 1, compared with a settlement price of Eur66.97/mtCO2e on Oct. 25, Intercontinental Exchange data showed
Platts, part of S&P Global Commodity Insights, assessed the EUA December 2024 contract at Eur64.52/mtCO2e on Oct. 31.
Natural gas markets saw significant losses on Oct. 31, the final day of October trade, as market talk that a transit deal to supply European buyers with Azeri gas through Ukraine circulated.
This had an immediate effect on EUAs, which pushed prices down by almost 2% on the day.
However, on Nov. 1, Slovakian gas importer SPP dismissed a report that Slovakia — together with Hungary — was close to signing a contract with Azerbaijan for continued gas delivery via Ukraine with its participation.
Q4 outlook
Prices faced pressure as investors cut their net short positions.
In contrast, power demand showed signs of rebounding in Northwest Europe, with some analysts expecting this to help prices recover in November.
Analysts at Commodity Insights expect EUAs to be between Eur70-80/mtCO2e in Q4 2024 fourth quarter, anticipating stronger demand boosted by higher thermal power generation.
“This increase comes despite recent declines from easing geopolitical risks in the Middle East, which have stabilized oil and gas supplies and lowered gas prices,” they said in a recent note.
In other news, official data confirmed that EU greenhouse gas emissions plunged 8.3% in 2023, driven by significant reductions from power and industrial installations.
However, the European Commission acknowledged that more action is needed for the EU to meet its ambitious target of reducing emissions by 55% by 2030 from 1990 levels.
UK keeps CPS stable
UK carbon prices dipped marginally, but demand has remained resilient, according to traders.
UKAs were trading at GBP38.09/tCO2e ($49.21/mtCO2e) at 1149 GMT on Nov. 1, compared with a settlement price of GBP39.19/mtCO2e on Oct. 25, ICE data showed.
Platts, part of S&P Global Commodity Insights, assessed the UK Allowance nearest December contract at GBP37.96/mtCO2e, up 52 from the previous settlement.
In policy news, the UK government said on Oct. 20 that it will maintain the freeze of its Carbon Price Support (CPS) at the equivalent of £18/mtCO2e ($23.33/mtCO2e) from 1 April 2026.
UK power generators have to pay the carbon levy, giving the sector a structural premium over EU generators before any gas or power price spreads.
This comes as UK carbon prices continue to be around $20/mt below EUAS.
Meanwhile, the government stated that its carbon border adjustment mechanism (CBAM) on imports of emissions-intensive products such as aluminum, cement, fertilizers, hydrogen, iron and steel will start on Jan. 1, 2027, but will no longer apply to glass and ceramics as previously proposed.
The new government, led by the Labour Party, also decided to raise the minimum threshold for CBAM goods to GBP50,000 to reduce administrative burdens for those importing small quantities, compared to the initial proposal of a GBP10,000 threshold.
