This week EUA demand should remain strong, so we expect EUAs to maintain the current bullish trend. The European Commission is setting a path for gas buyers to be able to buy Russian gas without violating sanctions, which may remove a source of downside risk from gas price volatility. There are, however, some upcoming political announcements to look out for that could produce volatility in the market. Finally, warnings are building about the risk of recession – and we might have some hints of possible volatility coming in a reading of the EUA price chart.   

  • Market fundamentals remain bullish: low hydro levels in southern Europe and continued lack of fuel switch (see chart 3) due to the high gas price mean EUA prices are likely to stay high on strong buying demand.
  • European Commission devises a way for gas buyers to avoid sanctions when paying roubles: payments would be considered complete once roubles or euros are deposited with Gazprombank. Some EU member states are in favour – Germany, Hungary, Italy and France. Gas payments are due after 20 May – this Friday. This should reduce potential for an EUA price drop but with Sweden and Finland seeking NATO membership, retaliation affecting energy markets cannot be ruled out.
  • Key political events that could prompt volatility for EUA prices: 
    • European Parliament vote on Fit for 55 – 16 May 2022. We might get some volatility from votes in the European Parliament on EU ETS reform. This could present a buying opportunity as the negotiations are between the environment committee (wants more ambition) and the industrial committee ( wants less ambition + no speculators). Below are some key points:
      • The LRF (% that the number of EUAs drops each year) is up for debate – the European Commission proposal was for 4.2% a year, so anything higher is bullish.
      • Market access for speculators – if there are hints the Parliament’s position is going to be to restrict speculator activity, we could see EUAs move lower. Any changes would come from 2025, a far-off deadline which calmed the market last week, but news that speculators could be cut from the market could prompt a further reaction.
      • The detail of the proposals suggests that even if speculators are cut off from the market, utilities could still speculate as they are compliance entities.
      • ETS Aviation: will EU ETS return to full scope for aviation and will free allocation of EUAs be phased out, and over what timeframe? Proposals look ilkely to have bullish effects on the EU ETS in the long term.
      • Maritime shipping: vote on inclusion of maritime shipping in the Parliament will come on Tuesday, giving clues as to likely scope of voyages covered (i.e. within EU/EEC ports) scope of ship types included (currently above 5000 GT), and timeline for phase-in of compliance obligations.
    • RePower EU plans presented – 18 May 2022: The EU’s plans for leaving Russian energy behind could mean some bearish pressure for EUAs as new supplies of EUAs may be added to 2023/2024 sales – to raise money for low carbon innovation, and to soothe the market as we are in an energy crisis. ICIS estimate that EUAs could move lower to just under 80 euros because of RePower EU.
  • Germany to push for floor price of €60, but others seek weakening: Euractiv report that Germany will seek a €60 floor price, if not agreed by EU member states, then implemented unilaterally within Germany. Poland, Hungary and Spain, however, are voicing concerns about speculation in the EU ETS.
  • Goldman Sachs see ‘very high’ risk of recession in the US: while German and French industrial production has dropped – a mid-term bearish price signal for EUAs.
  • TNAC announced – auction sizes to be slightly bigger after August: auction sizes from August are to be cut by 347.8 million EUAs, vs. the current cut to auction supply of 379.8 million EUAs. Therefore the market will be slightly looser than at present.
  • Technicals: MACD seems to be running out of steam, while we may be developing a head and shoulders technical pattern – see chart 2 below. A break below €76.75, which represented a key area of support a few weeks ago, could yield further price losses. €76.75 is a long way away however, with EUAs posting higher lows over the course of May so far, so the trend remains bullish.To the upside, €90 represents resistance which has held after a few attempts to move higher in previous days – as you can note on chart one from previous days’ upper shadows.

Outlook: neutral

  • Indicative EUA Price: €88.90
  • YTD Average EUA Price: €83.23
  • May average EUA Price: €87.78


1 – Dec22 EUA price chart 2 – EUA chart daily view – showing possible head and shoulders formation
3 – German fuel switch – the red line must dip under the yellow line for fuel switch and emissions reductions to be possible.


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