EUA 2023 price forecast: Will Cocaine Bear conquer Ferdinand the Bull?

o far in 2023, carbon has reached new heights amidst a backdrop of EU ETS reforms and an uncertain energy market. How will the front-year EUA contract develop for the rest of 2023 and what factors will weigh most heavily on prices? We expect fundamentals, driven largely by fuel-switching, to exert downward pressure for most of Q2. In Q3, REPowerEU volumes will prolong this bearish sentiment before policy, winter heating, and the contract expiry serve to buoy prices by the end of the year. We anticipate an average price of €82/t for Q2, €86/t for H2, and €86/t for the whole of 2023.