Climate Change

Price of CO2 hits all-time high above EUR 80 per ton

Price of CO2 hits all-time high above EUR 80 per ton

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Published

December 6, 2021

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Published:

December 6, 2021

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Carbon dioxide prices climbed on Friday, December 3, to a record of EUR 80 per ton in the European Union. The level was also topped in today’s trading.

The price of permits for emitting CO2 has increased 140 percent this year. Last December, it topped EUR 31 per ton for the first time, and at the end of August, it crossed the EUR 60 threshold.

CO2 prices were driven by factors including the agenda of the new German ruling coalition, rising production in coal and gas power plants, and technical issues.

The parties set to form the government in Germany have agreed to prevent CO2 prices from falling below EUR 60 in the long term. They said they would establish a national floor price.

The new German coalition has agreed to prevent CO2 prices from falling below EUR 60

Due to the recent surge in power prices, driven mainly by natural gas, burning coal for electricity has become profitable, but CO2 allowances must cover increases in output.

The pressure may continue as market participants don’t expect electricity prices to subside over the next few months.

Some technical issues are also pushing CO2 prices up.

According to Bloomberg, many options for carbon at EUR 80 by the end of the year are set to expire on December 15. It is probably driving investors who sold the out-of-the-money options to manage their risk by buying futures. The final annual EU auction is also a factor. It is set for December 20.

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