In the ETS, we see low industrial activity and weak power demand in combination with auction frontloading as the main factors for currently flagging EUA prices. However, a fast reduction in the emissions cap, inclusion of the maritime and aviation sectors and the end of free allocations to industry will all contribute to prices quickly rising to levels above 100 EUR/t before 2030. As a large volume of industrial carbon abatement investments become a serious alternative at these levels, we expect CO2 prices to enter a phase of slower growth in our Base case. In the longer term, the success of industrial decarbonization in hard-to-abate sectors, the cap trajectory after 2030 and the potential inclusion of carbon removals in the ETS will be major factors to keep an eye on.
GO markets have seen prices strongly deflating in recent months from all-time highs in late 2022 and still strong levels in 2023. Currently, spot contracts trade below 0.5 EUR/MWh and future expectations have become more pessimistic than a few months ago. Strong clean power supply from renewables and nuclear generation sources as well as a slack in (corporate) power demand have put a dent in our GO outlook. Delays or cancellations of electrification projects, particularly in the hydrogen sector, contribute to the sentiment. While we still think that prices will increase in the coming years due to the introduction of EU-wide corporate sustainability reporting standards and companies’ 2030 Paris target milestones approaching, our model results are strongly impacted by current GO oversupply. Persistent growth in RES generation will lead to a continuous decline of the value of GOs starting in the late 2020s, as the renewables share grows ever larger and the power sector decarbonizes.
The autumn 2024 edition of THEMA’s Green Values report has just been published on THEMA’s subscriber portal. It covers in detail the developments in the EU’s Emissions Trading System and the Guarantees of Origin markets. The chapters look at historic market developments, price drivers, cost projections and market impacts of regulatory changes that have recently been introduced or are anticipated to have a key impact in the future.
