European carbon is proving resilient to the gloomy economic outlook and keeps trading around €85/t even as the share of coal in the power mix is shrinking, thereby reducing the need for EUAs. We attribute carbon’s strong performance mainly to a growing realisation that the revised EU ETS framework will significantly tighten supply. The upcoming REPowerEU sale of EUAs will somewhat offset this in the near term – by frontloading supply – but probably not enough to bring prices down. We anticipate an average price of €90/t for Q3 and €94/t for Q4 of 2023. The weather represents an upside risk in the case of extreme heat this summer and/or cold winter, either of which could spur more coal burn to power cooling and heating. Overall, we lift our H2 forecast from €86/t to €92/t.