Turn the volume up: RePowerEU supply set, but not in stone

Digest: The Commission has released a draft regulation on auctioning rules to bring them in line with the updated EU ETS directive. Of key importance to the supply balance is the timeline for and the share of EUAs to be auctioned to fund REPowerEU and the Innovation Fund. The draft document establishes some transparency in this regard, setting out a preliminary schedule for the annual volumes for REPowerEU between 2024 and 2026, as well as providing an annual 40 million EUA minimum to be auctioned for the Innovation fund between 2024 and 2030. Overall, the document lays out a bearish scenario for carbon, as REPowerEU supply estimates are higher than envisaged. This is potentially mitigated by rule changes allowing for these volumes to be adjusted in line with the €20 billion revenue goal. Additionally, due to the remainder of allowances in the Innovation Fund, the likelihood of the fund bringing more than 40 million allowances per year from 2024-2026 is low.