Carbon prices have been trading consistently lower this year and no bullish signs are emerging, meaning that the EUAs will likely continue to fall, at least for the time being. Despite the current challenges, banks insist that carbon remains a lucrative investment opportunity.

“While the short-term outlook remains subdued and the medium-term outlook less bullish than originally envisaged, the longer-term picture remains bullish,” wrote ING bank in a note released two months ago.

Sweden’s largest bank SEB sees a major opportunity in the EU carbon market despite the current downward pressure on prices. “Every year has unique opportunities in different types of assets, equities, currencies, etc. We think that one of the great opportunities in 2024 when looked upon in hindsight, will be cheap EUAs,” said SEB in a note released this week. 

Analysts from the bank believe carbon prices will rebound strongly in the second half of the decade, despite what is going on right now. “Forward 2026/27 and onward fundamentals are thus still as strong as they were previously which calls for a minimum price of EUR 100/ton or more by that time horizon.”

One of the reasons is the expected economic revival in Europe following the energy crisis that hit the continent as a result of Russia’s invasion of Ukraine. “Industry will need increasingly more EUAs in the years to come and could utilize the current slump in EUA prices,” predict analysts from SEB.

Another key factor is the increase in buying from ship operators. From 2024 onwards, the shipping companies will join the EU ETS paying gradually for their emissions generated by voyages to/from/within Europe. Ship operators are expected to become one of the largest sources of buying “as they have no free allocations on their hands and will need every single EUA they buy in the years to come.