Consultancy firm ICIS expects bearish pressure for carbon prices to continue throughout 2024, despite a moderate recovery in emissions predicted for this year. Among the reasons, ICIS is citing the additional allowance supply that will be auctioned for the REPowerEU.

In a snapshot of the Energy Outlook report which will be released this month, the firm sees EU ETS emissions slowly growing by 0,9% compared to 2023. Still, the EU is auctioning an additional 86,69 million allowances this year to finance the RePowerEU objectives, which would “fully offset the marginal ETS-wide emission recovery,” according to ICIS.

 

The short-term bearish sentiment could be challenged by the “communication on EU’s 2040 climate target,” warns the consultant. The European Commission is expected to release its Communication on the EU targets for 2040 together with an impact assessment on 6 February.

 

In a separate document, data from ICIS analyzed by the Financial Times showed that industrial gas demand in 12 European states in 2023 was 23,5% below the average between 2017-2021. This year, the consultancy firm expects gas demand to recover, increasing by 8% compared to 2023, still 12% below the pre-crisis normal. “The vast majority of that extra demand will be met through yet more LNG,” predicts Tom Marzec-Manser, Icis head of gas analytics, on social media.

 

Regarding the power demand, the consultant also predicts a modest increase of 3% compared to 2023 which “is expected to be more than offset by increased renewables output.” Consumption would remain 4% below the 2017-2021 average, however.