EU emissions allowance prices reach all-time high

The price at the EU Emissions Trading System (EU ETS) could rise above €100 in the near future.
The price at the EU Emissions Trading System (EU ETS) could rise above €100 in the near future.

Europe's exceptionally low winds and frigid temperatures are driving the price of EU emissions allowances to all-time highs. In addition, companies are purchasing allowances before to April's end, which is when they are monitored to check they have not polluted more than they should have.

The price of emissions allowances (EUA) traded on the European Union's Emissions Trading System (ETS) increased again on Monday, with one metric ton of carbon dioxide per metric ton of carbon dioxideemitted costing €98.30.

According to analysts, the price could rise above €100 in the near future, which is due to the market's current high demand.

The upcoming week in Europe is expected to be cold and windy, necessitating an increase in coal, gas and shale electricity production. Furthermore, Europe's economy is performing better than expected; production levels may be raised cautiously.

Imre Banyasz, a consultant at the Ministry of Environment, said the price increase at the start of the year occurred the previous year as well. The European emissions trading system's annual cycle requires companies to submit annual reports by March.

"They must make sure they have enough credits by the end of April. In fact, businesses start trading more aggressively at the start of the year in order to secure the necessary amount of credit by then," Banyasz said.

As Eesti Energia must also purchase quotas based on production; the higher price will impact the price of electricity in Estonia, Olavi Miller, market analysis strategist for Eesti Energia, said.

"If you bought it in advance, you would have to invest a significant amount of liquid assets in it instead of making other investments. So rather than attempting to position themselves in the CO2 market, large power producers will concentrate on their primary business of generating and optimizing electricity," Miller explained.

The price of electricity produced by shale and coal plants rises by €0.9 per Megawatts for every euro of the price of emission allowances. Miller, however, stressed that this is not the most important factor influencing electricity rates, and as electricity in Estonia is not derived solely from oil shale, the final price is influenced more by weather, gas prices, major maintenance projects and events in Nordic countries.

Despite the fact that the CO2 market is expected to stabilize after April, with the annual average price remaining low, the annual supply of permits will be gradually reduced.

Prices will rise if demand remains constant.

"It will continue to rise in the long run; you can count on it. On the other hand, it is clear that the best solution to this CO2 dependency is more renewable [electricity]," Miller said.


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Kristina Kersa

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: