By Susanna Twidale
LONDON, January 23 (Reuters) – Analysts have lowered price forecasts for European Union carbon permits for 2024 to 2026, with weak demand from power plants and sluggish industrial demand set to weigh on the market.
EU Allowances (EUAs) are forecast to average 74.11 euros per tonne in 2024 and 83.31 euros in 2025, a Reuters poll of nine analysts showed. This is down 11.3% and 6.3% respectively from forecasts made October. BUSINESS INVESTIGATION54
The average forecast for 2026 was 100.13 euros per ton, down 2.8% from the October forecast of 102.97 euros/tonne.
The EU’s Emissions Trading System (ETS) forces manufacturers, power companies and airlines to pay for every tonne of carbon dioxide they emit by surrendering carbon permits as part of Europe’s efforts to meet its climate targets.
“Economic growth is likely to remain slow in the short term across Europe, which is likely to lead to further demand destruction in many of the industrial sectors under the EU ETS,” said Paula VanLaningham, director of carbon research at LSEG.
Industrial production in Germany, Europe’s largest economy, fell in November for the sixth consecutive month, the federal statistics office said earlier in January.
Forecasts for the first quarter of this year were cut by 12.9% to 72.61 euros/ton from 83.35 euros/ton.
“We don’t see much in the way of price increases this year. Fundamentals are unsupportive and investors are likely to again hold net short positions, keeping downward pressure on prices,” said Energy Aspects analyst Ben Lee.
The reference EU carbon contract CFI2Zc1 is currently trading around 62.50 euros/ton and has fallen more than 20% since the beginning of the year.
Strong renewable power generation across Europe has reduced demand for thermal power plant permits while the change in the compliance deadline is also expected to shift some demand to later in the year, the analysts said.
Companies this year will have to surrender permits by September 30 instead of April 30 as in previous years, allowing them more time to compile data and buy offsets.
EU co2 price survey COMMODITIES SURVEY54
(Reporting by Susanna Twidale Editing by Mark Potter)
((susanna.twidale@thomsonreuters.com; +44 207 5424753;))
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