Bloomberg – Rachel Morison and Jeremy Hodges
The cost of fossil-fuel emissions rose to its highest level in more than a decade in Europe, surpassing 20 euros a ton ($23) and adding to the cost of electricity across the continent.
Carbon emission permits have more than quadrupled from less than 5 euros since the middle of 2017 after European Union governments agreed to cut away a surplus that had depressed prices since the financial crisis that started in 2008. Utilities and industrial polluters need the certificates to cover greenhouse gas emissions they produce.
The move is a reminder that governments across the region are determined to curtail the emissions blamed for global warming, starting with shifting the power industry away from using coal and toward cleaner fuels such as natural gas and renewables. The result has been some of the highest power prices in years in Britain, France and Germany.
“This is an important milestone for the EU emissions trading system and something that seemed like an impossibility just a year ago,” said Jahn Olsen, an analyst at Bloomberg New Energy Finance. “There was a feeling that the recently finalized reform was the ‘last chance saloon’ for the ETS. The recent price movement is a strong indicator that the EU finally got it right.”
The rally is a result of the forthcoming market stability reserve, a mechanism designed to automatically control the supply of allowances that starts from Jan. 1. The MSR will remove 24 percent of permits in circulation next year by reducing the amount that governments sell in auctions, Bloomberg NEF said.
The benchmark carbon futures contract surged as much as 4.6 percent to 20.70 euros a ton in London trading, extending five days of gains.
The EU’s measures may push prices to as high as 50 euros a ton within the next three years, Carbon Tracker, a climate-change research group, said Tuesday. The forecast added to recent predictions of further market gains from Berenberg Bank to German utility RWE AG, Europe’s biggest emitter of greenhouse gase
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