In episode six of Back to Fundamentals,  Energy Aspects’ Head of Natural Gas and Carbon, Trevor Sikorski, and analyst Ben Lee discuss our outlook for European carbon markets in 2021 and beyond.

The EUA market has been volatile so far in 2021 and prices have hit record highs. We discuss our view that this speculator-driven rally in February will likely end with a retracement in prices in the short-term. But the upcoming review of EU ETS legislation later in 2021 means the bulls will never be far away.  We delve into our expectations of what changes the market will face in response to  the Green Deal.

High volatility is also likely to feature in the new UK carbon market, with trade set to begin before the end of Q2 21. We talk about why UK allowance prices should initially trade at a premium to EUAs.