LONDON, Oct 13 (Reuters) – Analysts have lowered price forecasts for EU carbon permits for 2024 and 2025 on expectations of lower demand from the power sector as generation from renewable sources such as wind and solar grows and amid a weak outlook for European industry.
EU Allowances (EUAs) are forecast on average at 83.55 euros a metric tonne in 2024 and 88.95 euros in 2025, a Reuters survey of seven analysts showed. That is down 9.9% and 11.3% respectively from forecasts made in July.
The average of forecasts for 2026 was 102.97 euros a tonne, the first time analysts had been polled for this period.
The European Union’s Emissions Trading System (ETS) forces manufacturers, power companies and airlines to pay for each tonne of carbon dioxide they emit as part of Europe’s efforts to meet its climate targets.
“Emissions across both power and industry look set to have plunged year on year in 2023. Power emissions have been reduced by low load, high renewable generation and coal-to-gas fuel switching,” said Energy Aspects analyst Benjamin Lee.
“Industry indicators show a continuing reduction in activity, with no signs of a return to growth likely any time soon,” he said.
Industrial output in Germany, Europe’s largest economy, fell in August for the fourth consecutive month, the federal statistics office said earlier this week, stoking recession fears.
In the shorter term, forecasts for the fourth quarter of this year edged down by 0.7% to 82.45 euros/tonne.
“The EUA (price) has weakened as we have moved closer to Q4, driven primarily by lower-than expected emissions and the ever-looming economic slowdown,” said Paula VanLaningham, Director of LSEG Carbon Research.
The benchmark EU carbon contract currently trades around 85 euros/tonne and has fallen some 16% since touching a peak of 101.25 euros/tonne in February.
Reporting by Susanna Twidale
Editing by Mark Potter
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