A Deep Dive into EU Allowance Price Dips and RGGI Auction Dynamics

In the world of carbon markets, while the EU Allowance witnesses a bearish trend with a three-month low, the RGGI auction showcases overwhelming demand by Compliance-Oriented Entities and investors.

~Preview of Article~

Turbulent Trends for EUA Market

The EU Allowance (EUA) market witnessed a dramatic twist last week as the benchmark December 2023 contract ended on a three-month low. Closing at EUR 81.52, down EUR 3.75 (4.4%) on the week, this marked the seventh consecutive day of falling EUA prices. The heart of this decline? A bearish sentiment that's rooted in an intricate interplay of supply-demand dynamics, intensified auction supply, and dwindling EU power emissions. And with the upcoming week also wearing a bearish tint, the market is bracing for further fluctuations.

RGGI Auction Analysis

An overwhelming demand saw bids flooding in, seeking to snap up 2.2 times the initially available 21.9 million allowances. Compliance-Oriented Entities, those that acquire and hold allowances mainly to meet regulatory compliance, led the charge, buying up a whopping 60% of the offerings. Notably, five bidders walked away with more than a million tons each, while 25 managed to secure 200,000 tons or more. The scale of bidding was nothing short of impressive, with six Compliance-Oriented Entities and seven Investors making substantial bids for a minimum of 1 million tons each.