EU carbon prices in the EU’s emissions trading system rose to an all-time high above 99 euros a tonne on Aug. 19, due to a cut to auction supply in August and a significant increase in demand.
According to Platts assessments published by S&P Global Commodity Insights, EU Allowance futures contracts for December 2022 delivery surged as high as €99.14/mtCO2e ($99.70/mt) on Aug. 19, the highest intraday price ever recorded for the nearest-December futures contract, compared with a close of €96.53/mtCO2e on Aug. 18.
The monthly auction volumes decreased to 24.1 million mt in August, down 43% from July levels, resulting in a short-term supply crunch.
From a demand perspective, drought and heat conditions threatened the electricity generation from low carbon sources such as hydro-electric and nuclear, resulting in increasing demand for gas-fired generation, which raises carbon emissions and the need for allowances.
Not only electricity from hydropower has dropped 20% overall but nuclear facilities have been restricted as they struggle to stay to cool. High temperatures also impacted energy output from power plants and solar panels.
Moreover, the hot weather has also boosted AC demand, raising the consumption of electricity in homes and commercial buildings, underpinning natural gas and coal prices in Europe.
However, as auction supply returns to normal levels, September may see carbon prices falling.
