Physical Carbon Monthly Report | June

13 June 2022

Physical Carbon ETC


Macro Outlook

Price movements in May were driven by policy developments in the European Parliament and the European Commission.

Early in the month, prices increased based in anticipation of leaked compromise amendments for the vote in the ENVI Committee of the European Parliament, as these amendments showed an ambitious stand of the Committee when it comes to the reduction of the cap and other factors. With coal burn in the power sector increasing at the same time, EUA prices increased to over 91.00 €/tonne by 17 May. [1]

Until mid-month prices slightly consolidated to under 90.00 €/tonne before increasing again to nearly 92.00 €/tonne on the day of the vote in the European Parliament. The key adopted amendments call for a 1) faster reduction of the cap with a one-off reduction in 2024, 2) a quicker complete phase-in of CBAM by 2030, 3) the implementation of the second ETS for transport and heating fuels, 4) phase-in of maritime in the EU ETS, 5) quicker phase-out of free allocation, 6) reduced MSR thresholds, 7) and a restricting access to physical EUA holdings to compliance companies and companies acting on behalf of compliance companies. This vote in the ENVI Committee is however just one step in the legislative procedure and the adopted file will not become law as is. The final say on the file will have the plenary of the European Parliament as well as the European Council. [2]

Based on a leak from the European Commission related to their REPowerEU plan, prices dropped to under 80.00 €/tonne the next day. In the leak, the Commission brings forward the proposes to sell additional 250m EUAs from the MSR to fund a quick transition away from Russian gas. This additional supply will depress prices and had a consequently negative effect on EUA prices. However, as above, the leak is just a first proposal form the European Commission and, according to media, there is already strong opposition building in the European Parliament and Council against this idea.



EUA Market Outlook

While political decisions highly affected EUA prices in May, in June political decision makers continue to meet and discuss the Fit-for-55 package as well as the REPowerEU package. [3] While no votes are scheduled, additional opinion and direction can emerge from Parliament as well as Council meetings.

Market fundamentals remain mixed with the Ukraine-Russia war weighing heavily on gas-fired power production and potentially on the wider macro-economic developments. With the MSR continuing to cut allowances from the auction, the market continues to be tight.

Events to watch

6th-9th June - Joint debates in the plenary of the EU Parliament's on ETS revision, CBAM, Aviation in the ETS


 Physical Carbon ETC Performance (As of 31.05.2022)







SparkChange Physical Carbon EUA ETC







EEX EU Spot (Phase 4)







Please note that all performance figures are showing net data.

Source: Bloomberg / HANetf. Data as of 31/05/2022


Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product.


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