As EU Carbon Prices Soar – Has the EU ETS Finally Found its Teeth?

EU ETS Carbon prices are around 20 Eur as of today, slightly off from their recent high of around 25 Eur in August. After several years in which the EU ETS was flooded with permits and prices were very low, prices are up around 300% over a 12-month period. Driving the rise in prices for carbon is the European Union plan that CO2 certificates which were not sold at auctions, will be transferred into a so called Market Stability Reserve (MSR) starting in January 2019, in order to make the market more resistant to turbulences. The EU aims to take 24 percent of certificates in circulation out of the market between 2019 and 2023, thus seeking to reduce the past oversupply of carbon allowances. The impact of this is seen by many to drive prices higher still in the next few years with predictions of around 30 Eur by 2020. However, prices have been fairly volatile recently as a combination of mild weather and a broader markets sell off has had an impact. The entry of more speculators as well as utilities hedging in advance of the January 2019 date has helped fuel prices higher over the last few months.… continue reading
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