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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.

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.


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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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