European carbon benchmark prices breach €70 for first time amid colder winter weather and consumption demand
European carbon prices have sustained record levels, climbing above €70 per tonne for the first time since the European Union’s market was launched in 2005.
Monday was the sixth consecutive day of European carbon allowances setting an all-time high.
The European benchmark price soared to €70.43 yesterday, amid colder than expected weather and less wind power generated across Europe.
EUA (European Union Allowances) contracts for December gained as much as 1.5 per cent on the ICE Index, while prices have more than doubled this year.
The developments follow the COP26 climate summit in Glasgow, where countries committed to “phase down” coal to reach net zero carbon emission targets over the next three decades.
However, they are now having to rely more on coal and gas generated energy to meet rising consumption demand this winter.
Power plants in the U.K. are now burning the most coal since the beginning of the month, according to Bloomberg.
This has contributed to gas and power prices rocketing to record highs alongside carbon.
High gas prices also make it more economical for power companies to burn coal, which emits twice the amount of carbon dioxide as gas power plants, requiring more carbon permits.
The IMF has recently called for European economies to face higher carbon costs to reduce fossil fuel usage.
Callum Macpherson, head of commodities at Investec, told City PM that the EUA market is simply being driven by supply and demand.
He said: “Demand for EUAs from EU emitters is high, because exorbitant gas prices has encouraged burning of coal for electricity generation and this has a higher carbon footprint than gas. Consequently, we are likely to see high carbon prices so long as gas prices remains high. It seems unlikely that the EU Commission will more carbon credits into the market in view of its climate commitments”