Carbon prices collapsed as the energy complex spiked on the Russian invasion of Ukraine

The European power spot prices were mixed yesterday, sharply rising in France, Belgium and the Netherlands due to the surging gas prices, but edging down in Germany as forecasts of soaring wind output offset the spiking fuel prices. The day-ahead prices averaged 205.35€/MWh in the four countries, +43.56€/MWh day-on-day.

The EUAs plunged by more than 8% on Thursday as market participants offloaded allowances to generate cash for the surging margin calls of the sky-rocketing gas and power markets. The Russian invasion of Ukraine indeed induced strong panic buying of power and gas contracts, with the German and French power front month prices posting 50% and 44% gains on the day. The massive sell-off of carbon allowances induced by the extreme volatility of the energy complex was actually similar to the one that occurred early-October. The falling equities and possibly some short-sellers betting on the market’s bearish sentiment may have fueled the sharp retracement as well. The EUA Dec.22 closed the session at 87.03€/t, -8.04€/t from Wednesday’s settlement with a morning auction clearing with a record 1.50€/t discount to the secondary market.

Some support materialized near 86€/t yesterday and the carbon prices are already rebounding this morning as the gas and power prices are observing a rather strong downward correction.