The European carbon market had a relatively calm start to the week, with trading activity remaining subdued during the morning session before gaining momentum in the afternoon alongside strong gains across energy markets, as gas prices climbed to a three-year high.

The benchmark contract briefly reached €85.34, marking its highest level since late July. However, the market was unable to hold on to the full extent of the gains, with the contract eventually settling at €84.74.

The situation in the gas market continues to deteriorate, with planned maintenance at Norwegian gas facilities adding to uncertainty surrounding the Strait of Hormuz. This comes at a particularly sensitive time for Europe, as the region would normally be stepping up injections into underground storage facilities to rebuild inventories ahead of the winter heating season.

Norway is set to reduce natural gas export capacity by around 20% during the final phase of scheduled maintenance, which will continue through the end of September. According to Gassco data, outages could cut capacity by approximately 71 million cubic metres per day, compared with normal deliveries of around 340 MMm³/d.

The reduction is particularly significant given that Norway supplies more than 30% of Europe’s gas demand, while storage levels remain unusually low. European gas storage facilities are currently around 65% full, according to Gas Infrastructure Europe (GIE), marking the lowest level for this time of year in 15 years. Inventories also remain well below the five-year average, with storage levels typically standing at around 80% at this point in the year.

Higher energy prices could pull EU carbon prices in opposite directions. Rising gas prices tend to improve the relative competitiveness of coal-fired generation, increasing emissions and, consequently, demand for EUAs, providing upward pressure on carbon prices. However, if elevated energy costs weigh on European industrial activity and economic growth, lower emissions and weaker compliance demand could eventually put downward pressure on EUA prices.