14th October 2025
- Carbon remains rangebound
- European chemical sector in decline
- UK climate change act
Carbon remains rangebound
UK carbon has remained within a £2 range since early September, closing last week at £55.53. Whilst the long-term price trajectory remains positive the short-term outlook continues to see structural weakness from industrial destruction due to high carbon and energy prices, potentially increasing global CO2 emissions (See article below). We continue to see increased coal imports to China to drive the economy. Investment funds may take some profit by selling off some of the accumulated long positions, although this may be counted by colder weather forecasts. The UK authority will auction 2.3m allowances on Wednesday with the EU auctioning 13m allowances over the week.
European chemical sector in decline
A new report by Oxford Economics suggests between 2019 and Q2 2025, the European chemical sector’s output declined significantly. It has contracted by 30% in the UK, 18% in Germany, 12% in France, and 7% in Belgium. High energy and carbon costs alongside regulatory and permitting burdens are undermining the sector’s viability. Emissions data suggest that, if European chemicals production is replaced by imports from China and the US, total carbon emissions will rise. Chinese and US chemical industries emit around threefold and twofold more carbon for the same volume of output, respectively, than those in Europe. The greater distances needed to transport the imports will also add to the greenhouse gas emissions.
UK climate change act
The UK Climate Change Act was voted through the UK parliament with almost unanimous cross-party support in October 2008 and has proved highly influential around the world with almost 70 countries following with a similar act. The act sets out a framework for cutting UK emissions and preparing the country for the impact of climate change. In 2019 the then Conservative government strengthened the act to a reduction of at least 100% below 1990 levels by 2050. Now in opposition the Conservatives have said they would repeal the Climate Change Act, which is stifling economic growth, but have so far not offered any replacement legislation.
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Disclaimer:
This newsletter is intended solely for the information of professional clients, including large corporates and public sector bodies such as universities and hospitals, and eligible counterparties. It does not constitute advice nor should it be relied upon in making decisions regarding the UK Emissions Trading Scheme (UK ETS). All content within this communication is provided for informational purposes only and has been prepared in accordance with the principle of fair, clear and not misleading information as required by COBS 4.2. Readers should seek their own professional advice when planning to undertake transactions in the UK ETS. No representation or warranty is given as to the accuracy or completeness of the information provided. The publisher accepts no liability for any loss arising from the use of or reliance on the information contained in this newsletter.
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