EU emissions trading rises to record highs in volatile energy market
Prices in European Union (EU) emissions trading have reached record highs amid increased demand for allowances, and fears of gas supply shortages as tensions fester between Russia and the West over the future of Ukraine.
The EU Emissions Trading Schemes recorded prices just shy of €93 per ton this morning.
Demand for electricity across the trading bloc is now up 3.4 per cent year-on-year, meaning it has almost regained its pre-pandemic level,.
Commerzbank commodities analyst Barbara Lambrecht, noted that coal has thrived in the current market conditions amid gas supply shortages, which has bumped up emission trading prices.
She said: “While the power mix has shifted noticeably on account of the massive rise in gas prices and a disappointingly small increase in electricity generated from renewables: coal-fired power surged by nearly 20 per cent year-on-year, whereas gas-fired power declined by a good five per cent.”
The analyst highlighted that 241 grams of carbon equivalents were emitted per kilowatt hour generated, and that the emissions of EU power producers have increased by almost nine per cent in 2021.
She also pointed to the latest notes from think tank Ember, which suggested the current trends show that making carbon emissions more expensive alone will not guarantee the phase-out of coal-fired power.
Lambrecht concluded: ” In our opinion, the future performance of carbon prices this year will depend among other things on the price determinants coal and gas. European gas prices are probably still too high to allow the pendulum to swing back to gas.”