Last Friday, the European carbon prices dropped to their lowest level since early June. The EUAs last traded at €79,35 posting a 2,5% weekly decline. This negative performance follows the 5,3% weekly drop previously recorded.

Also notable was the extremely narrow range of price movement. For the entire week, the EUAs traded between €79,3 and €81,50, which, based on Carbon Pulse’s observation, is the “narrowest five-day range since April 2021”.

The decline in carbon prices doesn’t come as a total surprise, despite the increase in fuel prices. Experts are expecting “a sharp fall in EU emissions in 2023, assisted by resurgent solar and wind generation along with fragile power demand”, writes S&P Global Platt, partially explaining the downward trend.

Demand for carbon allowances in the primary market also continues to be weak. The bid-to-cover ratio averaged just 1,68 last week, below this year’s average of 2,08 suggesting reduced buying interest.

Still, despite bearish pressure, S&P Global analysts expect prices “to average Eur86.4/mtCO2e and Eur90.30/mtCO2e in November and December, respectively.” Among the reasons for the rise are the reduction of auction supply and increased heat demand amid the winter season.