Exclusive European carbon prices did not react to rising prices on energy markets

Utilities are shifting to coal amid rising gas prices

Carbon prices in Europe at the beginning of March have so far withstood a sharp jump in gas prices amid the escalating conflict in the Middle East.

On February 27, trading closed at €70.3/t (base contract for December 2026), according to ICE, with the price falling 4.7% over the week and 115.6% compared to the beginning of the month.

Subsequently, on March 2, the EUA price was €70.57/t, rising only slightly compared to the sharp increase in energy prices – the carbon market primarily reacted to the weakness of the stock market.

The increase to €73.3/t occurred only the next day – in particular, it is believed that utilities purchased allowances to cover coal use amid a significant increase in natural gas prices. However, by the end of the trading week, the cost of carbon allowances had fallen, fluctuating in the range of around €71/t.

As Bloomberg notes, the ongoing conflict in the Middle East could increase demand for carbon credits in compliance markets if disruptions to LNG supplies force industry and utility consumers to switch to cheaper fuels that have higher emissions. Voluntary markets, on the other hand, may see a decline in purchasing activity.

In addition, the European carbon market remains at the top of the bloc’s agenda, among other things. In the third quarter, a review of the EU Emissions Trading System (EU ETS) and the Market Stability Reserve (MSR) will begin. Proposals are expected to be agreed upon at the upcoming March meeting of the EU Council.

In February, carbon prices in Europe fell amid calls for a review of the ETS. While they exceeded €90/t in January, according to the ICE exchange, they fell below €70/t in February (€69.2/t as of February 16).