This market is prone to price volatility. They are now at their lowest level in three years

Luc Williams

Revenues to the state budget

The price of an emission allowance for one tonne of carbon dioxide dropped to approximately EUR 58 per tonne. This is the cheapest since 2021, and in 2023 the price sometimes exceeded EUR 100/t, which contributed to the increase in energy prices on the wholesale market. The proceeds from the sale of allowances go to the state budget, and in accordance with EU law, at least half of these funds are to be allocated to the energy transformation.

As Robert Jeszke, head of the Center for Climate and Energy Analysis and expert of the National Center for Emission Balancing and Management (KOBiZE), calculates, in 2023 Poland sold over 65 million allowances at the auction at an average price of approximately EUR 83, generating revenue of approximately EUR 5.4 billion. – It seems that the sales price was very attractive when compared to the average price since the beginning of the year (63 euros). If this price were maintained, with a similar volume that Poland plans to sell in 2024, it would be difficult to repeat this amount of revenue – he says in a comment for

Demand may recover quickly

The expert notes that there is currently a very strong sale of allowances on the market, driven by very weak fundamental factors, such as, among others, a significant drop in production and emissions in the energy and industry sectors, an increase in the use of renewable energy sources, a greater supply of allowances at auctions (REPowerEU and the inclusion of the maritime sector) or record positioning of hedge funds on the decline in allowance prices (so-called shorts).

– Prices are also not helped by the postponement of the emission settlement deadline for 2023 from April to September this year, which means that decisions on the purchase of allowances by installations from the EU ETS could be postponed to the second half of the year. However, the current price drop may be short-lived and market demand may quickly recover. This market is susceptible to high price volatility and it cannot be ruled out that we will soon move from a state of great pessimism to a state of euphoria and there will be a very strong rebound in prices – says Robert Jeszke.

In his opinion, chances for a rebound can be seen in better economic prospects in the European Union countries for 2024, which will be associated with higher CO2 emissions, or in “playing” the future shortage of allowances after 2025. – Therefore, when estimating the potential revenues from auction revenues for 2024, one should be careful and also take into account the scenario in which the price for allowances finally starts to increase – explains the analyst.


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