ENVI’s vote for stricter EU ETS reforms lifted the carbon prices

The European power spot prices slightly faded yesterday, pressured by forecasts of stronger wind and solar generation but still supported by the high demand induced by the current warm spell. The day-ahead prices averaged 207.14€/MWh in Germany, France, Belgium and the Netherlands, -16.97€/MWh day-on-day.

On the curve, most power contracts firmed amid higher gas prices and  mixed news on the French nuclear situation. The nuclear watchdog ASN indeed stated that the stress corrosion issued affecting EDF’s nuclear fleet is linked to pipe geometry and, hence, would be less likely to affect the 900MW series, and accepted EDF demonstration that losing 2 RIS pipe out of 4 is manageable. On the other hand, the ASN confirmed corrosion signs had been detected on the 900MW Chinon 3 reactor, although not on the safety injection circuit.

The carbon prices steadily rose throughout Tuesday, lifted by the Parliament environmental committee’s vote for more ambitious reforms of the EU ETS. As leaked last week, the ENVI indeed approved a much stricter 67% 2030 emissions reduction target for the installations within the European carbon market, significantly higher than the 61% proposed by the Commission which would imply a steeper reduction of the carbon allowances supply in the next years. The bullish measure is however seen as unlikely to gain support from the in Parliament’s plenary and the EU Council given the current economic context and already sky-high energy prices. Among the other amendments voted, the committee adopted a reduction of the MSR thresholds, which should also face opposition from the Council, an acceleration of the free allocation phase-out, this time more likely to be accepted, and a widely debated clause to limit access to the EU ETS only compliance players and intermediaries. The potential bearish impact of the latter will however depend on how the measure is interpreted by the Commission, i.e. if speculators will still be allowed to hold carbon derivatives. The EUA Dec.22 eventually closed the day at 91.72€/t, +2.16€/t from Monday’s settlement but plummeted this morning as reports emerged that the European Commission will propose in its RePowerEU package to sell 200-250 million carbon allowances from the Market Stability Reserve. Subject to the Parliament and Council approval, the measure is likely to be widely debated and find strong opposition from the environmental committee but support from the industrial one and the member states struggling with the current high energy prices.

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