EU carbon prices hit 4-month highs on uncertainty over Russian gas transit

European carbon prices rebounded sharply to four-month highs as a pause in auctions along with a stronger gas complex, owing to uncertainty about Russian gas transit, pushed values over Eur73/mtCO2e on Dec. 31.

EU Allowances for the flagship December 2025 contract were trading at Eur73.40/mtCO2e ($76.44/mtCO2e) at 1120 GMT, up 2% from the previous day's settlement, according to data from the Intercontinental Exchange.

Platts, part of S&P Global Commodity Insights, assessed the EUAs for December 2025 at Eur71.99/mtCO2e on Dec. 30, the highest since Aug. 27.

In the absence of EUA auctions, the carbon complex continued to be greatly influenced by the European natural gas market.

European natural gas spot prices have ticked up in recent days amid expectations of no agreement for a continuation of Russian supply, while colder weather across the continent has also been supporting the market.

If Russian gas supply to the EU via Ukraine is halted in the new year, traders and analysts expect more gas-to-coal switching, increasing the demand for EUAs amid higher coal-fired power generation.

Analysts at Commodity Insights expect EUAs to rise to Eur77.50/mtCO2e in the first quarter of 2025, according to their latest report released Dec. 30.

"This increase is expected to be driven by seasonal demand as winter progresses and potential shifts in energy dynamics, such as the anticipated halt of gas transit via Ukraine starting in January 2025," they said in a recent note.