ENVI’s MEPs found an agreement on dividing measure

Except in Germany where a public holiday and forecasts of higher wind output offset the bullish pressure, the European power spot prices continued to rise yesterday, driven up by the soaring clean fuel costs and demand amid the ongoing heatwave observed across NWE. The day-ahead prices hence averaged 232.77€/MWh in Germany, France, Belgium and the Netherlands, +18.06€/MWh day-on-day.

On the curve, the power prices continued to post massive gains with the gas and carbon markets as further reduced gas flow at Nord Stream 1 and long-than-expected outage at the US LNG freeport buoyed the energy complex further up.

The EUA indeed extended their upward move on Wednesday as, on top of the bullish gas news, the market received support from reports that the ENVI’s MEPs had found a compromise on the widely debated free-allocation phase-out, the breaking point of the Parliament’s plenary last vote. The new deal reached plans a complete free-allocation phase-out for sectors covered by the Carbon Border Adjustment Mechanism (CBAM) by 2032, two years later than the initial proposal rejected last week. With this clause now eased and Tuesday’s vote to re-table the amendments already agreed on before the Parliament’s rejection, we have a clearer view of the outcome of the next plenary’s vote scheduled on June 22^nd : a 63% 2030 emissions reduction target, access to the EU registry only to compliance players, lowered and decreasing MSR thresholds and other non-dividing measures proposed mid-May by the ENVI. However, even if voted by the full Parliament, it does not mean that such ambitious reforms will be implemented as the European Council is likely to back a revision file closed to the Commission’s position. But a successful vote on June 22^nd will reduce the (bearish) risk of delay in the fit for 55 process and increase the chances of implementation in 2024.

The EUA Dec.22 closed the day at 86.20€/t, +2.05€/t from Tuesday’s settlement.