Market Development
- Carbon prices close the week at €8.27, up 17c from previous week
- Price dips as low as €8.02 on Monday
- Trading range of 33c during the week
Auction Overview
- 15Mt comes to market this week in four EU auctions and one UK auction.
- September brings in second highest auction volume of the year at ~63Mt.
Price Action
Last week saw a modest recovery on the front December contract with a week-on-week rise of 17c. Prices corrected from a short-lived downward trend. The EUA carbon trading range for the week was 33c with the market touching its low of €8.02 on Monday. Tuesday saw the biggest gain of the week and each subsequent day the market closed at or above the €8.25 level. So despite a return to more ‘normal’ auction levels there was no bearish follow-through mainly due to clean dark spreads widening over the week: power was largely unchanged but coal, in €, took another beating. The EUAA auction on Wednesday had a strong cover ratio and cleared at €7.94 but was otherwise unremarkable. The energy complex as a whole remained bearish with oil and gas down again.
Price Impact: Carbon remained supported in spite of the wider market volatility and weak energy complex due to widening clean dark spreads. Given coal’s fall carbon should have been stronger and was presumably tempered by increasing auction volume. This week’s 15Mt of auctions (and no EUAA auction) is slightly higher and so will provide a stronger test of the market’s resilience.
Market Stability Reserve (MSR) update
The MSR has passed all but one legislative hurdle, the last one is expected to be a formality and thus a fully operational MSR, reducing auction supply by 12% per year of the total over-supply, will come into effect in January 2019. You can read more about the MSR here. Important MSR dates:
- 18th September – EU Environment Minister endorsement
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