Carbon prices will end 2023 significantly lower than previously expected, according to a note by Morgan Stanley. In its base case scenario, the bank expects the EUAs to close the year at €75. The new price level is 11% below the previous estimate.

New forecasts for the period 2024-2027 are between 11%-36% below the last forecast. However, the bank has raised its estimates for carbon prices from 2028 onwards with EUAs expected to trade around €160 by 2030.

Morgan Stanley lowered its near-term outlook on increased supply due to additional allowances under REPowerEU and reduced demand as emissions from power plants and industry are declining compared to pre-pandemic levels.

The latest survey of carbon analysts published by Reuters in July echoes a similar downward revision. “The EUAs are expected to average 85.58 euros in 2023 and 92.68 euros in 2024. That is down 0.7% and 3.6% respectively from forecasts made in April. The forecast for average prices in 2025 fell by 4.3% to 100.28 euros/tonne.” The next survey by Reuters is expected to be published within a month.

A similar view is put forward by Lawson Steele, a preeminent carbon expert well known for his previous bullish predictions. “I no longer see the market as tight as I previously did for the near-term years,” wrote Steele in an analysis published this month.

The expert is reducing its near-term estimates with carbon prices expected to average €110 in 2024 and €115 in 2025. “These are significantly down from my previous forecasts though ultimately end up at the same €200/t end-point in 2030.”