European carbon is proving resilient to the gloomy economic outlook and keeps trading around €85/t even as the share of coal in the power mix is shrinking, thereby reducing the need for EUAs. We attribute carbon’s strong performance mainly to a growing realisation that the revised EU ETS framework will significantly tighten supply. The upcoming REPowerEU sale of EUAs will somewhat offset this in the near term – by frontloading supply – but probably not enough to bring prices down. We anticipate an average price of €90/t for Q3 and €94/t for Q4 of 2023. The weather represents an upside risk in the case of extreme heat this summer and/or cold winter, either of which could spur more coal burn to power cooling and heating. Overall, we lift our H2 forecast from €86/t to €92/t.
Economic unease weighs on carbon, reform provides support After seeing prices moving between €60 and €100/t in 2022, European carbon has traded more sideways in the first five months of this year. Starting the year in the mid €80s, the EUA front-year futu…
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