Carbon beats a new historic record at 80 euros

Posted on Dec 3, 2019 2021 at 12:32Updated Dec 3, 2019 2021 at 13:23

Carbon never stops breaking records. The price per tonne of CO2 on the European market for “rights to pollute” crossed the 80 euros mark on Friday, setting its twelfth historic record in fifteen sessions. Since the start of the year, the price that manufacturers in certain sectors have to pay to offset their CO2 emissions has thus gained almost 50 euros, an increase of 140%.

At the start of the year, the price of “rights to pollute” was pushed up by anticipation of the reform of the European market. Unveiled on July 14, this aims to adapt the market to the more ambitious climate objectives set for 2030 by lowering the ceiling of available CO2 emission rights more quickly.

Gas increase

Soaring natural gas prices then took over, pushing electricity producers to turn again to coal, which is cheaper but more polluting. A movement that forced them to buy more carbon to offset these additional CO2 emissions, driving up prices. This use of coal should last a good part of the winter and increase European CO2 emissions.

The combined rise in energy and CO2 prices has caught European politicians by surprise, with some countries calling for limiting speculation in this market in order to limit price increases and volatility.

Asked by the European Commission on the issue, the market regulator, Esma, estimated last month that speculation was not particularly significant on carbon, ruling out an immediate risk of intervention by Brussels. The price then jumped to nearly 70 euros, already encouraged by the climate commitments made at COP26. The agreement on other mechanisms known as “carbon credits” found in Glasgow has, in particular, attracted the eye of investors to the carbon issue in general. The price per tonne of CO2 has risen by no less than 25% since the end of COP26 in mid-November.

Other technical market factors related to how options and futures work have also been driving the upside in recent days. This new increase, however, revives fears of an intervention from Brussels. If the Commission has always refused to do so, it could be tempted to intervene to limit the weight of carbon in the costs of companies, already faced with soaring prices for materials and raw materials. The price of carbon should therefore come back to the fore at the European summit on December 16 and 17.

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