SparkChange Carbon Market Monthly Report (August 2023)

September 11, 2023

August Developments:

  • The downward trend from mid-July carried over into August with prices reaching nearly €81/tonne after the first seven trading days. Alongside this price trend, investment funds – according to the CoT Report1 – showed a decline in EUA positions from a net long position of 11m end of July to a net short position of 6m early August.
  • However, in August EUA demand on the back of record high temperatures saw auction volumes halved, and, prices started to increase in the second trading week to reach levels of €89/tonne.
  • However, failing to breach a key technical level, prices tumbled to €85/tonne by the end of the month.
  • Early August utilities continued with their H1 reporting showing decreased fossil generated power output and hence lower emissions compared to H1 2022.

Outlook

  • With auction volumes coming back to normal in September and increasing in October, one could expect pressure on prices going forward. The key ingredient to price developments will be whether demand is able to live up to the supply increases
  • On the demand side, buying from the power utility side will be highly dependent on temperatures, renewable generation as well as overall power demand. The other key point on the demand side is how European industry will develop in the next weeks and months and whether production and hence emissions will pick up again.
  • With no regulatory events being expected before end of year, the market will be driven by supply and demand fundamentals.

Key Events to Watch:

  • No key events to watch in September

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1 Commitment of Traders report published by the Intercontinental Exchange

August 2023
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