Rise in carbon prices to accelerate move away from coal

Rise in carbon prices to accelerate move away from coal

EU carbon prices could average €35-40 per tonne over 2019-2023, accelerating the switch from coal to gas and questioning the rationale for keeping old coal and lignite power plants running beyond 2021, said a new report by Carbon Tracker.

According to the report, carbon prices are on course to reach €25 by the end of 2018, about €7 higher than the current price on the EU carbon market, the ETS.

This accelerated rally in carbon prices anticipates an EU-wide reduction of carbon allowances in 2019-2023 that will leave the power and aviation sectors with a deficit of about 1.4bn tonne of carbon allowances, according to the report.

The Carbon Tracker Initiative defines itself as a team of financial specialists making climate risk real in today’s capital markets.

Putting a price on carbon is becoming increasingly common within corporations and governments as the impact of climate change – and the related economic losses – is becoming more and more tangible.

The World Bank Group, as well as business groups and investors, have called for wider support to carbon pricing in order to bring down emissions and drive investments in cleaner technologies.

The discussion is gaining momentum as the countries will meet at the next UN climate conference (COP 24) on 3-14 December in Katowice (Poland). The conference is of crucial importance as it forms the deadline to deliver an as-of-yet unwritten set of rules that will govern the Paris accord, among which the possibility to put a price on carbon.

In Europe, the EU ETS (emissions trading system) is the bloc’s flagship emissions reduction tool. In its report, Carbon Tracker explains that it has been the hottest commodity market in the world over the last 16 months, with the price of European carbon allowances (EUAs) up 310% since May 2017, 120% since the start of the year.

“This stunning performance has been driven by the market’s anticipation of the start-up from January 2019 of the Market Stability Reserve (MSR), the centrepiece of the EU-ETS reform agreed last year,” the document reads.

Further information

August 21, 2018