Carbon prices edged up ahead of ENVI’s vote

The European power spot prices rose yesterday amid forecasts of higher demand induced by the current warm spell, and dropping wind output. The day-ahead prices averaged 224.12€/MWh in Germany, France, Belgium and the Netherlands, +16.86€/MWh day-on-day.

The power forward prices extended losses along the curve, tracking the bearish gas market as fears of Russian gas flow disruption with the looming rouble condition deadline eased with the European Commission confirming that buyers may be able to keep paying Russian gas without breaching sanctions. The short-term term contracts observed the largest losses as the back end of the curve received support from the ongoing concerns over the French nuclear availability for the coming winter and next year.

The carbon prices edged up to close near 90€/t with thin exchanged volumes as participants tested the resistance ahead of the Parliament environmental committee’s vote on the EU ETS reforms scheduled later today. Among the amendments to be voted, the market expects the ENVI to propose a 67% 2030 emissions reduction target, a significantly stricter goal than the 61% initially proposed by the Commission which would be strongly bullish for EUA prices if adopted as well by the Parliament’s plenary and the EU Council. The ambitious measure is however unlikely to find traction in the other EU entities for now given the current political and economic context with energy prices already at multiples of what they were a year ago. On the bearish side, reports emerged that the ENVI also planned to propose positions limits for non-compliance players which could lead to speculators offloading EUAs, although on top of needing the assessment of the Commission, the reform’s impact on the market could be very limited if the limit only apply to physical holdings and there if speculators are still allowed to hold carbon derivatives.