After four consecutive sessions of gains, carbon allowances lost momentum during Wednesday’s trading session, as buying interest gradually faded and proved insufficient to sustain the recent upward move or push prices decisively above the key €85 level.

The EUA Dec’26 contract climbed as high as €84.72 during Wednesday’s session, reaching its strongest level since July 23 and moving closer to the €85 threshold. However, the contract was unable to hold on to those gains, reversing course later in the session and eventually settling at €82.68, marking a daily decline of around 2%.

Profit-taking among traders may have contributed to the reversal. At the same time, near-term fundamentals have become somewhat more bearish. According to AleaSoft Energy Forecasting, wind and solar power generation in Germany is expected to increase this week, potentially reducing demand for thermal generation and adding downward pressure on both gas and carbon prices.

The softer outlook for carbon has also been reinforced by weakness in the European gas market. Gas prices have been trending lower in recent days, retreating after reaching their highest levels of the year earlier in the week. Alongside weather conditions becoming more favorable for renewable generation, the geopolitical backdrop has also improved, easing some of the supply-risk premium in the gas market.

According to Mind Energy on Thursday morning, “The bearish sentiment is the result of renewed Middle East peace hopes, or at least hopes that some sort of agreement could lead to a reopening of Hormuz.”

In the near term, the return of traders to the market following the summer holiday period, together with ongoing negotiations over the EU ETS review, could add further volatility to carbon prices. At the same time, the approaching compliance deadline could provide greater conviction to market direction, particularly if compliance-related buying interest begins to emerge.