Bad Omen: As EUAs Fall Amidst Gas Crisis, How Low Can Carbon Go?

Document summary

Despite recent severe gas supply disruptions occasioned by the problems over the Russian/Ukraine supply price negotiations and extremely cold weather across the EU, EU Allowances (EUAs) prices actually fell by 8%. Prices therefore could come under pressure when temperatures and gas supplies normalise. This confirms Deutsche Bank's view that macro economic factors are behind this fall due to a steadily weakening EU economy since late summer 2008. Negative macro fundamentals will beat all other factors in H1 2009, and that "the all-time low on Phase-2 EUAs of €11.8/t could be breached if oil falls further."