Analysts have lowered the price forecast for carbon allowances for 2024 by 20% amid expectations of lower demand and ample supply due to increased auction volumes “linked to the bloc’s REPowerEu energy independence policy,” as reported by Carbon Pulse.

Currently, the EUAs are trading at their lowest in almost two years and have already fallen by around  25% since the start of the year. The decline was widely predicted due to auctions resuming and reduced compliance demand. However, the price “outperformed” expectations.  

“Further pressure from softening gas prices and a weak primary market auction” as stated by Montel News, is adding further bearish pressure on top of the original bearish bias. TTF front-month settled on Monday close to its six-month low amid strong supply and milder temperatures.

The auctions were resumed last week following a month of closure due to winter holidays. The daily average cover ratio of 1,77 is well behind last year’s average of 1,99 and with one exception, all sales showed reduced interest, giving a negative signal to the market.

According to the European Commission, a total of around 677 million EUAs would be auctioned this year, compared to just 518 million allowances sold in 2023. This year’s volume includes an additional, 86,68 million allowances that will be sold in 2024 contributing towards a target of €20 billion allowances in the context of REPowerEU.