European Carbon Price Weighed Down By No-Deal Risk

This article first appeared on the BNEF mobile app and the Bloomberg Terminal.

  • EUA price has fallen by 15% since start of August
  • Market players fear no-deal price crash

European carbon prices are falling as the October 31 Brexit deadline nears. Uncertainty is building among market participants and further volatility can be expected.

Any threat to the bloc’s stability, such as a no-deal Brexit, tends to weigh on prices. European emission allowances fell 5% in the first three days of September, and have dropped 15% since August 1.

BloombergNEF expects market sentiment to have a bigger effect than any EUA sell-off under a no-deal scenario. Were a Brexit deal to be agreed – continued U.K. participation would bring its own risk as one year’s worth of supply would likely hit the market over just a few months.

The EUA price should recover in the medium-term, with the Market Stability Reserve helping to mop up excess EUAs resulting from a U.K. sell-off.

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