EU ETS prices fall sharply

Allowance prices in EU’s emissions cap-and-trade scheme drop by a third as lower power prices hit demand

Prices in the EU emissions trading scheme (ETS) have fallen by almost a third since the start of the year, as low power prices discourage utilities from forward hedging and supply of allowances is boosted by the impact of the REPowerEU frontloading scheme. Prices opened the year at more than €80/t of CO₂e ($86.5/t) and hit a low of €51.10/t of CO₂e in late February, before recovering to trade at €55–56/t of CO₂e. Utilities are the main buyers of allowances in the EU ETS and their behaviour therefore has a strong impact on prices. Typically, utilities buy power, allowances and gas or coal at the same time on forward curves, locking in margins. But such behaviour has been limited in recent mon