Overview

Last week EUA prices traded within a relatively narrow range, reflecting a stabilisation after higher volatility in the EU carbon market before the Iranian conflict began. Prices for the benchmark December 26 futures contract traded between €71.41 and €74.46 only marginally higher than levels seen in early March when futures hovered around €69–€71.

In a move underlining the negative correlation currently seen between carbon and energy, the market has been less volatile since the War started and has stabilised from the downward troughs in February that were driven by concerns over potential policy intervention in the EU ETS. As oil and natural gas benchmarks struggled with news of either escalating hostilities or a potential ceasefire, EUA futures have enjoyed a relative period of price consolidation, with modest day-to-day fluctuations rather than sharp swings. The market tone remains highly cautious, however, as traders manage the energy market swings and await clearer policy signals in the coming weeks: particularly the potential impact of reforms to the EU carbon market framework.