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December 13, 2021

Record EU carbon price continues to rise; sucks up fossil fuel profits

Rapid growth in the price of carbon licenses on the EU Emissions Trading Scheme has started to cause concern.

By Matt Farmer

As the cost of EU carbon credits pushes past €90 per tonne for the first time, heavy polluters are looking to the difficult months ahead.

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If current price trends continue, carbon prices may exceed €100 per tonne before the end of the year. Analysts have said that this remains possible, but unlikely.

Carbon costs on the EU Emissions Trading Scheme (ETS) have risen to more than 150% of their price at the start of November. Since the start of 2021, prices have risen to 250% of their starting price.

Current prices sit significantly above the International Monetary Fund’s recommended global carbon price of $75/tonne (€66/tonne). However, economists polled by Reuters recently indicated that achieving net-zero emissions by 2050 would require a $100/tonne (€88/tonne) carbon price in the immediate future.

The EU ETS entered its fourth phase this year. This means less free carbon allowances and higher carbon costs as a result.

The price also reflects the increased demand for energy as Europe enters winter. The continued high price of gas has discouraged gas power plants from meeting this demand, in turn leaving space for more polluting plants such as coal. These require more licenses to operate, further driving prices up.

In the UK’s recently-separated carbon market, a similar but less pronounced trend has pushed in the same direction. There, the price of carbon has reached approximately $97/tonne (£73/tonne), still below its peak in September.

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Free Report
img

How can hydrogen ride the sustainability wave?

The Hydrogen market is expected to expand significantly in the next few years – GlobalData has tracked more than 43.6 mtpa of total active and upcoming low carbon hydrogen production capacity (green and blue hydrogen). As the industry develops and the cost of producing hydrogen drops, demand is expected to increase significantly. As a result, countries across the world are announcing much needed supporting policy framework for hydrogen. While refining and ammonia production have traditionally been the key consumer sectors for hydrogen, new uses such as transport and energy storage are set to influence the market. While green hydrogen presently has a small share in the overall production mix, it is poised to increase given the ambitious targets announced by various countries. GlobalData’s report provides insights into key issues in the emerging hydrogen space, such as:
  • Hydrogen value chain
  • Demand drivers
  • Key application areas
  • Technology trends
Read this report and formulate winning strategies for your business.
by GlobalData
Enter your details here to receive your free Report.

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