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EU Carbon Price Surges Past $100

The price of carbon dioxide on the European Union emissions market hit a record high of 98.30 euros per ton, or $104, as Europe braces for a cold spell and a forecast for low wind power output.

“Temperatures in Northern Europe are actually now forecasted to go below seasonal averages next week, which might instigate utilities to increase their hedging activities,” one carbon emissions trader told Reuters.

Earlier this year, Reuters reported that analysts expected carbon prices in the EU to trend higher this year and the next two as European countries began to recover from the energy crisis and the price of energy declined.

Since the start of 2023, the price of carbon in the EU has already gained 20 percent and, depending on the weather, could swell further. Analysts see the average price for this year at 81.40 euros per ton, moving up to 94.14 euros per ton in 2024.

After this week’s peak, however, some analysts are forecasting carbon dioxide could top 100 euros, or $106, later this year. According to the Financial Times, this already happened, yesterday, with one EU carbon allowance hitting 101 euros.

Many energy transition proponents in Brussels have hoped to see such prices as soon as possible as the higher cost of emissions is seen as critical for motivating more efforts—and investments—in decarbonization.

“The fundamental point about this market is the EU has cleared the way for higher prices as that is what is ultimately needed to meet their aims of cutting emissions,” the head of climate research at Pierre Andurand’s hedge fund told the FT.

The EU plans to gradually phase out emission permits by 2039, which lends a significant upward potential to future prices. Last year, carbon prices also got a solid push by the increase of coal-powered generation amid the gas shortage, which led to greater demand for carbon permits.

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By Irina Slav for Oilprice.com

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