(Bloomberg) -- UK carbon prices reached a record low as mild and windy weather reduces demand for the permits from gas-fired power plants, and traders try to gauge the impact of possible market reforms.

The permits, which hit a bottom of £32.83 ($41.25) per ton on Wednesday, are required by industrial ventures and gas-fired power plants to emit carbon. More power from wind turbines, hydro plants and imports has meant there has been less demand for the licenses from gas plants.

“It’s been more of a mild, wet and windy story than anything else,” James Huckstepp, a London-based strategist at BNP Paribas SA, said of the UK market. Traders have also sold permits in recent days as the market awaits government guidance on proposed reforms that could see UK rules more closely aligned with the European Union’s trading scheme, Huckstepp added.

This week’s low is the furthest permits have dropped since the UK started its own emissions-trading regime in 2021 following departure from the European Union. Industry groups including Energy UK have pushed the British government to re-link its program to the EU’s, saying the current weak and volatile price may undermine investment in the country’s energy sector.

Updates on the possible reform are due this month, where the UK could create a carbon border adjustment mechanism, similar to the EU’s new program. It could also tighten the UK’s supply of permits, similar to the EU’s market stability reserve.

The recent drop in European gas prices has also lowered prices of permits in the EU, too, where investment funds have built a record net-short position of almost 39 million allowances, according to data released last week.

Read More: How Europe Will Tax C02 Emissions Beyond Its Borders

With lower European gas prices, it’s become relatively less profitable than previously to produce power from burning coal, a more polluting fuel that requires more licenses. EU permits closed at €68.82 per ton on Wednesday, near the lowest in more than a year.

The weaker gas market is “the most flagrant culprit behind this bearish tone” in EU allowances, said Gregory Idil, a trader formerly at Vertis who expects the allowances to drop as low as €65 per ton in the near term. 

The extension of a compliance deadline in the EU has also likely eased demand for permits in the market in the short-term, BloombergNEF analysts including Emma Coker said in a November note.

--With assistance from Elena Mazneva and Andrew Reierson.

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