This week there are two key topics that could influence EUA prices. 1) maintenance on Nord Stream 1 pipeline is set to be completed on Thursday 21 July. Given the negative correlation between EUA prices and natural gas prices, any extension to the maintenance or no resumption to gas flows could send gas prices higher and EUA prices lower, potentially under €80. 2) The EU is to publish its emergency plan for maintaining gas supplies through winter. That emergency plan could both impact heavy industry, and therefore EUAs in bearish fashion if industrial shutdowns look probable, but also mean more use of coal and alternatives to natural gas – which would be bullish for EUAs. On current evidence, against the backdrop of continued high emissions and hot weather, EUAs will keep trading in a range-bound fashion and bouncing off the trend line shown in chart 1 until something happens to move the market – potentially one of these two possibilities. EUAs could drop under 80 euros if gas supplies are cut. 

  • 11.5 million EUAs will be sold this week at auction, 2.67 million more than last week.
  • Coal burn remains strong, emissions remain high. Coal and lignite power generation profitability continues to outstrip gas power generation profits – see chart 2. Hot weather in Southern France will also affect nuclear generation as rivers used for cooling will become too hot. Given the lack of wind and hot temperatures that probably also means fossil fuel sources of power take the place of nuclear generation – a net increase in demand for EUAs. This adds to already low hydro levels & strong demand for air conditioning in Southern Europe. Some interesting charts on French power generation are included below.
  • Bearish potential – Wednesday 20 July European Commission to release winter readiness plan: this is expected to include measures to conserve gas supplies. If the plan entails more coal burn, that should be bullish for EUAs, but if it means curtailment of industrial production, that could send a bearish signal to the market. A drop to industrial production would also mean less power consumption so could be quite bearish overall.
  • Bailout for industry: the EU’s competition authority has approved a 5bn fund for major energy users – i.e. heavy industry. Subsidies are limited in nature but designed to shield from recent high energy prices. This could limit some bearish potential for the EU ETS if the money keeps industry producing in spite of high energy prices.
  • Bearish potential – Thursday 21 July Nord Stream maintenance scheduled to be completed: if the pipeline comes back online, that should soothe gas prices and be supportive for EUAs. If the pipeline doesn’t come back online or there is a delay, that could cause fear in the market of recession and/or that industry may have to conserve gas supplies and decrease production – we are looking for a break of the 83-84 Euro level which currently represents trend support as a signal prices could drop further. See chart 1.
  • August reduced auction supply: most years EUA prices increase in August as the volume of EUAs sold at auction halves for summer. While wider fears of cuts to gas supply and of recession could upset this pattern of price increases in August, the low supply of EUAs suggests price increases remain possible.
  • Trilogue discussions began on 11 July: discussions between Parliament, Commission and Council will continue over the next few months on EU ETS reform.
  • REPower EU meets opposition in European Parliament: the market didn’t really react to the Parliament’s ENVI group’s rejection of the use of 250 million EUAs from the MSR to raise money for a faster shift away from Russian gas. If the likelihood of EUAs from the MSR decreases, this should send a bullish signal to the market.
  • Oil prices drop under $95 a barrel for the first time since the Ukraine invasion began – not directly relevant to the EU ETS, but potentially an indicator of recession fears.
  • Macroeconomic outlook: a 0.25% interest rate increase is expected for 21 July, and more could come.
  • Support & Resistance levels: low volatility levels last week, and generally very thin trading. Low volatility often precedes a breakout – which would make sense in the context of Wednesday and Thursday’s possible news. The 100 day-Moving Average sits at €81.93 and €200 day MA @ €73.39. The daily chart is ranging between 83-86 with major support levels at around €86.65 on the upside and €83 on the downside. The price is currently lying between the 23.6% (88.80) & 38.2% (82.39) FIBO levels, and any break above or below is expected to have momentum.
Support Levels:
S1 – 83.00
S2 – 81.90
S3 – 79.60
Resistance Levels:  
R1 – 85.50
R2 – 86.67
R3 – 88.60

Outlook: neutral – price direction will depend on developments on Wednesday and Thursday.

  • Indicative EUA Price: €84.15

  • YTD Average EUA Price: €83.52

  • MTD average EUA Price: €84.37


1 – Dec22 EUA price chart 2 – Clean Spreads – ICIS data
3 – French  power  generation  year  on  year.  Note  decrease  to  nuclear  generation  has  prompted  more  imports  in  chart  4. 4 – France net power import/export

For more details on market outlook & protecting against your carbon risk, please email or call +31 20 522 0292