EU Parliament finally agreed on common position for ETS revision

The European power spot prices reverted yesterday, the French and German day-ahead prices decreasing on forecasts of higher nuclear availability and wind output while prices rebounded in Belgium and the Netherlands amid falling solar production and Belgian nuclear availability. The day-ahead prices hence averaged 311.69€/MWh over the four countries, -2.45€/MWh day-on-day.

The decreasing gas flows and uncertainties over the balance for this winter buoyed the power curve prices further up on Wednesday, the French prices for November and December 2022 climbing to a fresh record high above 700€/MWh.

But the main news of the day came from the political environment with the European Parliament approving the amendments to the ETS Revision proposed by its environmental committee (ENVI), finally agreeing on a common position for the free allocation phase-out timeline for the CBAM-covered products, the most dividing point that led to the rejection of the previous proposal during the last vote early-June. Already announced last week, the measures include a 63% emissions reduction target by 2030 (from the 61% proposed by the Commission), a MSR upper threshold lowered to 700mt and decreasing with LRF, a free allocation phase-out for the CBAM sector over 2027-2032 and a market access restricted to compliance players and mandated entities. If the formers were expected and hence already priced in by the market, the latter triggered a moderate sell-off as speculators possibly saw it as a threat of seeing their access to the market removed. The clause however does not mention the derivatives (futures and options) et is subject to an assessment from the Commission on the potential impact of the measure on the market. The options expiry also taking place yesterday and resulting profit taking from in-the-money options may have provided additional pressure at the end of the session. The EUA Dec.22 eventually closed the session at 81.88€/t, -2.85€/t from Tuesday’s settlement.

The next step in the political agenda is the environmental council meeting scheduled on June 28th.