A bit more political certainty emerging on power markets and the EU ETS however could give buyers the confidence to buy EUAs at prices under €70 and halt losses, so in short-term there is some potential for consolidation and/or a modest recovery. Later today, 3 October, the European Parliament’s Environment Committee (ENVI) will vote on the REPower EU proposal to raise €20bn from EUA sales. The ENVI position looks relatively less bearish a proposition than the original Commission proposal. The market may wait for news there before deciding on a direction. Looming recession, a still tight and expensive gas market, the EU’s energy market interventions, and now potential sabotage that could affect European energy infrastructure should maintain downside risk for EUAs in mid-term however.

  • 9.4 million EUAs are to be auctioned this week, 3.1 million less than last week.
  • EU Energy market interventions: on Friday, for the period 1 December 2022 – 31 March 2023, the European Energy Council agreed to
    • Cap non price setting power generation revenues at €180 / MWh – see diagram below if unfamiliar with marginal pricing in power markets. That could affect renewables, nuclear, and lignite where gas is setting power prices. Coal apparently won’t be included, but a look at clean dark spreads suggests the tight gas market will keep coal fired power generation relatively more profitable than gas fired power generation through winter even with this price cap applied, meaning this shouldn’t be a cause for further EUA price losses.
    • Voluntary target of 10% lower gross energy consumption – bearish, in line with market expectations.
    • Mandatory 5% cut to peak energy consumption – bearish, in line with market expectations.
    • ICE proposes to allow use of EUAs as collateral for short positions on carbon market – that would lend some stability as margin calls have been a source of volatility & a prompt to sell EUA holdings previously.
  • “Heating season” begins – will gas supplies last the winter? As noted in the last report, cooler weather last month caused a spike in natural gas demand that could prompt more industrial shutdowns in a few months. The International Energy Agency expects a cut to gas consumption of about 55 billion cubic metres (bcm), mainly due to cutbacks to industrial production. Residential energy consumption takes up about 100bcm per year. The IEA also model that a 13% cut to consumer gas consumption is needed. Gas storage stands just above 87% full across the EU. LNG capacity is only growing very slowly – the gas market looks set to remain tight for winter.
  • REPowerEU votes today on compromise on EUA sales: the Environment Committee in European Parliament’s votes on a compromise package to sell only Innovation Fund EUAs to raise €20bn over 3 years. This is a relatively less bearish proposition than the Commission’s original proposal to sell EUAs from the MSR, and also the €30bn over three months that right wing parties in Parliament had put forward. Today the Environment Committee in European Parliament votes on a compromise package to sell only Innovation Fund EUAs to raise €20bn over 3 years.
  • Bearish wider markets: German inflation has grown from 7.9% in August to 10.1% in September 10.1%. The Dow Jones Industrial Average is down 22% for 2022.

Outlook: neutral, price increase possible


  • Indicative EUA Price: €65.80
  • YTD Average EUA Price: €82.28
  • MTD average EUA Price: €67.19



1 – Dec22 EUA price chart 2 – Power markets pricing diagram

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