- European carbon prices fell due to weak demand, but analysts anticipate a recovery with colder weather boosting demand.
- Maritime sector inclusion tightens supply, potentially driving EUA prices higher amid winter demand.
- Germany’s CO2 emissions dropped 10%, reaching record-high auction revenues of Eur18 billion in 2023.
European carbon prices experienced a decline in the week ending Jan. 5, attributed to soft demand. Analysts and traders anticipate a potential recovery driven by colder weather in the coming days, boosting demand for emission allowances (EUAs).
Maritime Sector Inclusion and Supply Dynamics
Despite a projected increase in the supply of allowances in 2024, driven by the inclusion of the maritime sector in the EU Emissions Trading System (ETS), EU auctions are set to commence on Jan. 15. The shipping sector’s inclusion is expected to contribute 90 million mtCO2e in 2024 and 86 million mtCO2e in 2025, tightening supply for the month.
Price Outlook and Macroeconomic Factors
S&P Global analysts anticipate a rise in EUA prices due to supply constraints and heightened winter heat demand. However, a bearish macroeconomic environment may exert pressure on the energy complex. Germany’s annual CO2 emissions dropped by 10% in 2023, reaching their lowest since the 1950s, primarily attributed to economic factors rather than long-term measures. Despite emission reductions, revenues from Germany’s carbon allowances auctions hit a record-high Eur18 billion in 2023, reflecting the significance of emissions trading in achieving climate targets.
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Source: spglobal
