European carbon emission prices hit record highs, nearing EUR 100 per ton

The cost of a ton of CO2 within the EU’s Emissions Trading System reached an all-time intraday high of just below EUR 95 as the market is preparing for the possibility of crossing the EUR 100 mark.

Natural gas continues to be so expensive in Europe that it is fueling the demand for coal for heating, power production and other purposes, even though the costs of emissions from burning the solid fossil fuel are much higher. Weak wind and the cancellation of an auction for CO2 permits at the European Energy Exchange on February 1 over a technical malfunction helped push prices for the emission certificates to EUR 94.91 at the ICE Endex market.

The futures contract expiring in December closed yesterday at a record EUR 94.21 per ton of carbon dioxide equivalent as the glitch tightened the supply of allowances within the European Union’s Emissions Trading System (EU ETS).

Tensions at Ukraine’s borders impacting gas market

Traders are still focused on the shortage of gas from Russia and the amassment of its military forces at Ukraine’s borders. At the same time, the United States is sending 3,000 troops to other Eastern European countries, adding to the tension that is already affecting the gas market.

CO2 prices retreated after the morning spike to EUR 93.82 per ton, but analysts are mostly betting on a further rally toward the psychological EUR 100 mark. The cost of permits topped EUR 80 for the first time just two months ago, compared to only EUR 32.94 per ton from the end of 2020. The price of British carbon allowances closed at a record GBP 85.78 per ton yesterday.

Global carbon permit turnover jumped by over 2,5 times in 2021

Financial data provider Refinitiv said earlier this week that the market for trading emissions surged 164% last year to a record EUR 760 billion on a global scale.

EU ETS accounted for EUR 683 billion and the North American market advanced by only 6% to an equivalent of EUR 49 billion. China also has an emissions trading system.

The Western Balkans, a group of countries in Southeastern Europe looking to join the EU, are obligated to roll out carbon pricing, too.