European carbon allowance prices fell by 8% over the past week

European carbon allowance prices fell by 8% last week. Weaker fundamentals and, in particular, negative sentiment surrounding an uncertain macroeconomic outlook in both the EU and the US are putting further downward pressure on prices, market participants told international news outlet Montel.

Weather favors renewable generation

The price of European Union Allowances (EUAs) expiring in December this year fell below 83 EUR/t CO2, reaching its lowest level since January this year.

“Everything is now working in favor of a bearish trend in EUAs,” an unnamed trader told Montel.

Another market participant explained that the relatively mild weather so far, together with very favorable conditions for renewable energy generation, is also playing a role. This is reducing conventional generation, thereby lowering demand for emission allowances.

Negative sentiment around allowances has been reinforced by concerns about the state of the European economy. The latest data from Germany showed that Europe’s largest economy had entered a recession. There are also concerns about the US economy, as the prospect of a US default was discussed last week. The EU and US financial markets are highly interconnected, and the effects of a default would be felt globally. A US default was, however, averted towards the end of the week.