The outlook for the UK ETS this week remains bearish. Geopolitical and economic concerns look likely to dominate. One question is what will happen at auction this week – if utilities are still swapping EUAs to UKAs we might see some buying interest at auction, though with the trend bearish, bids might be below the market and drag the UK ETS price lower. Added to this, is a forecast for colder weather coming in from the east which should usually boost UKA demand, but may just put pressure on gas and coal prices to the extent that UKAs go unhedged for now. As with EUAs, buyers don’t need to own a UKA in order to emit CO2 – provided they buy by compliance time. UKAs have looked slightly more stable compared to EUAs over the past week and now sit at a zone of support as visible on chart 1 below. A break lower could send UKA prices quite a bit lower. We have a bearish-neutral outlook for UKAs this week.

UK ETS Outlook: bearish-neutral

Indicative UKA price: £69.75

YTD average UKA price: £79.71

MTD average UKA price: £71.54

1. UKA Dec22 Price Chart 2. Snapshot of UK energy generation 7/3 3. Coming cold weather


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