2 Mar 2022

Latest EUA and UKA Carbon Credit prices. Market volatility prevails due to recent events in Europe.

EU Carbon (EUAs)

What started as a nervous unwinding of positions on Monday turned into a flood of panic selling from investors yesterday as EUAs suffered their largest ever one day fall

EUAs lost as much as €16 (20%) at one point yesterday as prices tumbled to a low of €66.00 before closing at €68.85

That was not the end of the fire sale however as EUAs fell to as low as €55.71 this morning before rebounding sharply to current levels around €68 as compliance buyers clearly entered the market

Whilst increases in gas prices in theory should be fundamentally bullish for carbon (more coal fired power generation) this was clearly an exercise in risk reduction from investors and funds that have bought into carbon over recent months following €100 price predictions

The Ukraine crisis also prompted Poland to suggest the EU ETS should be suspended. Whilst this is highly unlikely, the current situation could see a focus on energy security over carbon cuts and may slow the progress of the EU ETS reforms under the “fit for 55” package

UK Carbon (UKAs)

UK Allowances have also fallen, tracking EUAs lower yesterday although the big falls were this morning, with low volumes of UKAs trading under £60 at one point before recovering quickly to around £73 at the time of writing

Whilst most of investor focus is in EUAs, the downward trend also impacts UK Carbon and given the limited liquidity in UKA market, a forced sale of even a small volume of UKAs can have a big impact.

Whilst there are clearly opportunities for operators looking to manage compliance, trading conditions remain tricky. The market has moved over a £14 range today on the back of very thin volumes

We are seeing UKA prices move quickly and “gap” through levels on very limited volumes, with a very wide bid-offer spread (currently £3 but has been a much as £10!!)

Source: CF Partners