EUAs Rebound on Technical Trading, UKAs Hold on to Key Level
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EU carbon prices are on the rise after falling to a three-week low of €68.86/tonne earlier last week, as market participants focus on technical trading and the on-again, off-again correlation with front-month natural gas prices.
December 2025 EUA futures traded at a high of €71.20/tonne on Friday, boosted by the resilience of key technical support levels at €68.30. This latter level was tested thoroughly on Thursday and held firm, providing a platform for algorithmic buying as well as some opportunistic purchases by compliance entities.
With the annual deadline for covered installations to surrender EUAs matching their 2024 emissions falling on September 30, time is starting to run short for industrials to cover any remaining shortfalls. So far this year, compliance buying appears to have been patchy, as macroeconomic signals have been both mixed and fluctuating.
Over the weekend, the EU and US governments reached a trade deal that results in European goods being subject to a 15% tariff in the US. The EUA market had been eyeing these ongoing trade negotiations, and with expectations of the the deal closing imminently, the market reacted bullishly and rallied above €70.00 last Thursday.
However, there is also the matter of allowance supply. Traders have been waiting for the European Commission to reveal the updated auction program for the remainder of 2025, as well as a progress update on the allocation of free EUAs for the 2025 compliance year.
The updates will give a strong pointer to market supply for the balance of this year as well as next, and there may even be a statement on the progress of the REPowerEU sales program, which is selling €20 billion worth of EUAs over four years to help fund a switch away from Russian fossil fuel supplies.
Across the Channel, UK Allowance prices have held on to the £50.00/tonne mark after briefly dipping to as low as £46.60/tonne two weeks ago, after the European Council of ministers published a draft negotiating mandate to guide the Commission in its discussions over linking the EU ETS with the UK market.
Speculative traders have trimmed their bullish bets slightly from the peak net long of 19.4 million UKAs back in May, but still hold a sizable 16.2 million UKAs of net length. Investment funds’ share of total UKA open interest (OI) now amounts to more than 12%, compared to funds’ 5.8% share of total EUA OI.
The Council’s mandate holds the Commission to a pretty strict position in talks with Westminster, requiring the UK to implement “dynamic alignment” of its carbon market rules with the EU’s regulations, and to accept the European Court of Justice as the final arbiter for any disputes involving EU law.
While linking the two markets is seen as an eminently sensible technical course of action to lower costs and improve efficiencies, the political sensitivity of the UK accepting EU jurisdiction in some areas, and the requirement to adjust its national ETS laws to match the EU’s may raise some opposition in political circles, particularly after the opposition Reform party recently pledged to unwind the country’s Net Zero commitments.
Carbon Market Roundup
The weighted global price of carbon was $50.57, up 1.8% week over week. EUAs were up 2.1% over the week to close at €71.34. UKAs were up 1.8% at £50.10. CCAs fell 0.7% at $28.03. RGGI rose 2.7% to end at $23.65, while WCA was up 0.5% at $62.21.
