Physical Carbon Monthly Report | September

20 September 2022

Physical Carbon ETC


Macro Outlook

July EUA price action was again driven by consequences of the war in Ukraine and the EU’s reaction.

Please note that all performance figures are showing net data. Past performance is not a guarantee of future performance and when you invest in ETFs, your capital is at risk.

In August, the EUA market went through 3 phases:

Over roughly the first 3 weeks, the EUA market saw consistently high EUA demand as utilities burned more fossil fuels to compensate for lower than usual hydro and nuclear power generation.[1] On the supply side auction volume was reduced by 50% in August, which happens by design every year. The resulting supply gap led to a steady increase in prices, hitting an all time high just shy of €100 on 19th August. [2]

This triggered some profit taking and a correction of the market, dropping back to around €90. [3]

In the last week of August, however, EUA prices started to tumble; rumours around an EU-wide power market reform coupled with negative comments on the EU ETS, such as a potentially less ambitious Fit for 55 reform or the revival of the MSR sale idea, led to negative sentiment.[4] On 30th August, the daily auction cleared around €0.80 below the secondary market, sending EUA prices down to €80.

Several utilities published Q2 reports, indicating that they slowed down power hedging (and therefore EUA buying) significantly year-to-date. This is driven by low liquidity in the power forward market, indicating a pickup in utilities’ hedging once liquidity picks up. [5]



EUA Market Outlook

September will be a very important month for the EU ETS, as political activity ramps up both on the EU ETS reforms as well as the wider energy market.[6] The EU ETS reform picks up pace now, as several trilogue meetings (set up to find a compromise between EU legislative bodies as the last step before the reform can be enacted) take place over the coming weeks.

Second, the discussion of a power market reform in the EU could lead to a (significant) correction in power prices, which in turn could bring back liquidity to the forward market. This could trigger increasing EUA demand from utilities as described above. [7]

On the fundamental side, energy intensive industry starts to reduce production, which results in less emissions – but also an adjustment of the free allocation. It is unclear how many EUAs will be sold as a result. On the other side, the ongoing low availability of nuclear and hydro power should keep emissions from the power sector high.


Events to watch

8th September: ENVI Committee discussion REPowerEU, which includes the planned sale of MSR EUAs

9th September: Emergency Energy Council – shedding light on the EU power market reform

14th September: State of the Union address


 Physical Carbon ETC Performance (As of 31.08.2022)







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 31/08/2022


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.


Learn more about our Physical Carbon ETC 


Sign Up to Insights

Tell us how we can help