July Market Commentary

July Market Commentary by Upper Park Trading Limited – A Thornbridge Appointed Representative

 European carbon prices fell slightly in June, after a strong early-month rally was halted by the growing conflict in the Middle East. Prices peaked around 13 June before reversing sharply after Israel’s strike on Iranian nuclear facilities, which triggered a spike in oil and gas prices on the back of fears of supply disruptions through the Strait of Hormuz. While the broader energy complex rallied, the EU market sold off as geopolitical and macro risk drove investors to reduce exposure, highlighting a temporary decoupling between EUAs and gas prices.

The UK was the weakest-performing carbon market in June, retreating from pre-EU-UK summit highs. Movements closely tracked EUAs, reflecting increased correlation following the 19 May EU-UK ETS linkage discussions.

The California carbon market rebounded strongly from the prior month’s losses. Price action during the first half of the month was subdued, with prices range-bound amid uncertainty surrounding a potential legal response to President Trump’s April Executive Order and a tepid reaction to the first unsubscribed auction since August 2020. Momentum picked up later in the month as investor interest returned with prices hovering just above the floor.

The RGGI carbon market posted strong gains in June, driven by surging power demand amid the first major heatwave of the season across the Eastern and Midwest regions of the US. Robust cooling-related demand bolstered fossil generation across key RGGI states.

The New Zealand market maintained its upward trajectory in June, amid a continued pick-up in investor activity. Prices were unaffected by the Q2 auction failing to attract any bids with secondary market prices trading well below the 2025 auction price floor of $68. In policy, the NZ government introduced the forestry conversion amendment bill into parliament, which looks to reduce large-scale farm-to-forestry conversions by restricting land use capability. The bill has been put before parliament and is expected to come into force in October.

– Upper Park