The front December carbon contract experienced a 1.5% increase to €7.40/mt, the highest level since February 26th, on ICE Futures Europe. By 9:29 am London time, the contract traded at €7.37/mt, up 7.1% week-on-week, the largest increase since March 20. Volume also saw an uptick, with Thursday's aggregate volume reaching 26.9 million mt, the highest since March 26th on ICE.
Louis Redshaw, founder of Redshaw Advisors in London, suggested that the rise in carbon prices could be attributed to utilities, including RWE, potentially needing to purchase more allowances under the government's plan. However, Redshaw cautioned that the German proposal could lead to lower allowances if utilities sell back permits intended for coal-fired power stations that they plan to close, or if new regulations require them to buy back power as it becomes unprofitable. He also noted the possibility of power stations in neighbouring countries buying allowances and boosting electricity exports to Germany.
Redshaw expressed concerns about political interference in the carbon market, stating that it is already facing challenges from politicians with proposals related to renewables, energy efficiency, and market reforms. He added that the German plan, even if passed domestically, would likely face significant difficulties in implementation at the EU level.
