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Carbon follows weaker gas to hit 23-month low

(Montel) European carbon prices slipped to their lowest level in 23 months on Thursday amid further weakness in gas prices and gloomy economic expectations.

The benchmark Dec 24 contract for EUAs last traded at EUR 60.76/t, down EUR 1.65 on its prior settlement. Earlier, it touched EUR 60.26/t, its lowest since March 2022.

The market has now shed a quarter of its value since the start of the year.

Observers have highlighted a combination of falling gas prices that have curbed the cost of switching away from coal-fired generation, as well as an absence of utility demand for hedging purposes at present price constellations.

“The whole energy sector is lower. Gas was down 6% in a week, EUA is following,” said a trader with a carbon consultancy. “It does not stop. Shorts keep adding.”

This week’s commitment of traders data showed speculative investors remained interested in expanding short bets on carbon, despite their largest expansion of long positions in six months.

Downward revisions to economic growth forecasts for 2024 only compounded negative sentiment, the trader added. Last year saw a 19% drop in fossil generation across Europe amid a combination of a decline in demand coupled with an expansion of renewable and nuclear energy.