Energy Crisis

European carbon prices tumble, failing to scale new highs as gas drops

European carbon prices tumble failing new highs gas drops

Photo: Geralt from Pixabay


May 9, 2022






May 9, 2022





There may be no fresh risks of an escalation in the Ukraine war and in the standoff between the EU and Russia regarding its fossil fuels, but recession fears spilled over to the carbon market. The price of a ton of CO2 equivalent within the EU ETS fell more than 5% after challenging recent record highs.

Prices of European permits for emissions of carbon dioxide and other greenhouse gases were racing last week toward record highs, which were set in February with the surge in fossil fuel demand amid the energy crisis and the anticipation of Russia’s invasion of Ukraine. The surge was reversed today with an all-out drop in stocks and commodities including gas and oil.

Fears of a global recession sent prices of fossil fuels lower, spilling over to the European Union’s Emission Trading System (EU ETS). The benchmark December futures contract tumbled more than 5% on the ICE Endex exchange to just under EUR 87 per ton of CO2 equivalent, compared to the all-time closing high of EUR 96.93 from February 8.

EU is reforming its market for carbon certificates

The decline in carbon prices was helped by a weaker-than-expected auction for the certificates within the EU ETS mechanism. Traders are still focused on the war in Ukraine. There seem to be no immediate threats of an escalation and the EU has not yet reached a consensus on the proposed halt of imports of Russian oil.

If the Kremlin stops delivering natural gas to Europe, the resulting decline in consumption would lower the demand for CO2 permits and increase recession risks

Bloomberg reported that Russia’s Gazprom tried to assure European clients that they can keep paying for its gas through Gazprombank, which converts the funds to rubles, though the European Commission earlier said it is a breach of sanctions. There is still the risk that the Kremlin could block the deliveries of natural gas to Europe.

The ban on shipments of coal scheduled for August 10 still stands. On the upside for CO2 prices, the European Parliament is preparing to vote on a proposal for a carbon market reform, which may lead to the system’s expansion to transportation and the buildings sector.

Investors are pouring money into green energy, carbon market sector

BlackRock’s head of sustainable indexing Manuela Sperandeo said cumulative flows into sustainable exchange-traded products (ETPs) are continuing to grow. It may indicate a rise in interest among investors in green energy as well as in the carbon market.

Markets also priced in Portugal and Spain’s temporary caps on natural gas and coal for power plants. The EU’s push away from Russian fossil fuels is disturbing the supply chain and may result in shortages.

Moreover, European countries are turning to domestic resources such as offshore gas, possibly delaying the energy transition. They are seeking coal, gas and oil from elsewhere, too, which is likely to keep prices elevated and add upward pressure on EU ETS quotations, unless demand significantly weakens with the economic slowdown.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment
Please wait... Please fill in the required fields. There seems to be an error, please refresh the page and try again. Your comment has been sent.

Related Articles

Rystad Energy Power-grids-investing-USD-3-1-trillion-2030-global-warming

Power grids require investing USD 3.1 trillion by 2030 to limit global warming

21 February 2024 - Outdated and inadequate power grids are one of the most significant stumbling blocks for the energy transition, Rystad Energy warned

serbia necp pks ldk energy planning

Pivotal project aiming to reshape energy landscape in Serbia was finalized successfully

15 February 2024 - The IPA financed project "Further Development of Energy Planning Capacities" has served as an example of collaboration among all the energy sector stakeholders in the country for methodological strategic planning

First record broken this year January 2024 warmest in history

Another climate record broken: January 2024 warmest in history

09 February 2024 - January 2024 was the warmest in history and also the eighth consecutive month in which global temperatures reached all-time highs

EUKI, for the eighth year in a row, inviting climate projects to apply for grants

EUKI invites climate projects to apply for grants for eighth year in row

07 February 2024 - The European Climate Initiative (EUKI) has once again opened a call for donations for cross-border climate action projects