EU carbon allowance auction holds steady at 79 euros, demand coverage ratio falls but market support remains solid

⑴ On Monday, the EU completed a routine auction of 31,990 tons of spot carbon allowances on the EEX Exchange, with the average transaction price at €79.04 per ton. This represents a slight decline compared to the €79.10 per ton in last Friday’s German auction, but remains higher than the €75.00 per ton in the June 10 Polish auction. ⑵ The cover ratio for this auction was 1.42, meaning the bidding demand was about 1.42 times the supply. Although this is lower than the 2.19 seen in last week’s German auction and the 1.89 in the Polish auction, it still remains above 1, indicating that the fundamental willingness of market participants to take up the allotments has not deteriorated significantly. ⑶ Looking at the regional distribution of the recent three auctions, the German and Polish auctions were of smaller scale, while the overall EU auction was of a larger size. Prices have shown some resilience around €79, suggesting a stage of supply and demand balance in the carbon market at current price levels. ⑷ Going forward, attention still needs to be paid to policy developments concerning the EU’s Carbon Border Adjustment Mechanism, as well as the transmission effect of energy market price fluctuations on carbon allowance demand. Changes in the auction cover ratio remain an important indicator for assessing market sentiment.