Following a 1.87% decline on Monday—the largest one-day loss in two months—EUA prices staged a recovery in Tuesday’s trading session. The rebound came after a senior lawmaker on climate policies dismissed the false reports that had triggered Monday’s sell-off.

Media reports indicated that the European People’s Party (EPP), the largest political group in the European Parliament, was prepared to support several amendments to the design of the EU Emissions Trading System (EU ETS). These proposals were widely interpreted by market participants as bearish for the carbon market, fueling concerns over a potential weakening of the system and contributing to downward pressure on EUA prices.

According to Montel News, citing an early draft negotiating position, “EPP would back giving free ETS allowances to power generators after 2030 in crisis situations.” Furthermore, Montel reported that the political group—whose members include European Commission President Ursula von der Leyen and EU Climate Commissioner Wopke Hoekstra—also intends to limit the participation of speculative investors in the carbon market.

On Tuesday, Peter Liese, a senior German lawmaker widely expected to play a leading role in the upcoming revision of the EU ETS, told journalists that his party has no intention of granting free ETS allowances to power generators, dismissing the earlier media reports.

The market once again demonstrated its sensitivity to policy-related news, reacting sharply to rumours surrounding the forthcoming review of the EU ETS while paying little attention to more traditional market fundamentals, such as nuclear reactor availability and forecasts of above-average temperatures and prolonged heatwaves across Europe this summer.