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Benchmark EU carbon price closes at its lowest level since March 2022
The benchmark EU Allowance (EUA) carbon contract closed at 58.50 euros/metric tonne on Friday, its lowest closing level since March 2022 amid weak power sector and industrial demand for permits.
Prices have fallen more than 25% since the beginning of the year amid weak industrial demand and as strong renewable power generation has curbed demand for permits from fossil fuel power plants.
"Industrial demand for EUAs remains low, partly due to the current macroeconomic conjecture, with major industrial sectors covered by the EU ETS having shown weak production data for 2023 relative to the previous year," said Gregory Idil, BRS Shipbrokers senior carbon emissions trader.
The benchmark December 2024 contract CFI2Zc1 hit an intra-day low of 58.20 euros/MWh on Friday, the lowest level since touching 56.50 euros/MWh on March 8, 2022, in the wake of a collapse in energy prices following Russia’s invasion of Ukraine.
Friday’s (Feb 9, 2023) closing level of 58.50 was the lowest since the March 7, 2022, closing price of 58.30 euros/MWh.
"Signals from latest short-term weather forecast are very bearish, due to warmer than normal temperatures with increased wind supply which could dampen demand for EUAs," said LSEG analyst Luyue Tan.
EUAs are the main currency used in the European Union's Emissions Trading System (ETS) which forces manufacturers, power companies and airlines to pay for each tonne of carbon dioxide they emit as part of the bloc's efforts to meet its climate targets. Shipping firms also have to pay for a portion of their emissions.
Sources: tradingeconomics.com, nasdaq.com
