Data casts doubt on EU Emissions Trading System - Energy Management Summit | Forum Events Ltd
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  • Data casts doubt on EU Emissions Trading System

    960 640 Stuart O'Brien

    The price of EUAs, the tradeable unit under the EU Emissions Trading Scheme (ETS), jumped from €7.00/tCO2e in 2018 to an 11-year high of €27.46/tCO2e at the beginning of April this year.

    During the last year, emissions under the carbon trading scheme in Europe fell by 3.5%.

    A new report, the ICIS Market Insight: The Impact of Higher Carbon Prices on Utilities and Industries, suggests that the increased carbon price had only a marginal effect on reducing emissions in 2018.

    The downward trend in emissions was driven by the power sector, specifically increased renewable generation replacing fossil fuel generation.

    The Market Stability Reserve (MSR) is the key reform of the EU ETS and ICIS expects this mechanism will reduce auction volumes by roughly 1.70bn EUAs during 2019-2025, tightening the system and pushing companies to reduce carbon emissions.

    Governmental policy and regulation will form part of these reductions, but carbon prices will be the lever that controls the speed at which new investments will take place.

    The ICIS Market Insight report states that a high carbon price could accelerate the use of lower carbon technologies and the coal-to-gas switch.

    The ICIS Market Insight: The Impact of Higher Carbon Prices on Utilities and Industries is available here.

    “We expect some lag in the adoption of new technologies by industry as they continue to receive a greater part of the allowances for free, in order to shield them from the carbon leakage risk. But more stringent benchmarks and higher prices should provide the catalyst toward long-term investment in cleaner production technologies and energy efficiency,” said Phillip Ruf and Matteo Mazzoni, joint authors of the ICIS European carbon market analysis.

    “With triggering higher carbon prices, this new framework will, in fact, also result in higher revenues from national auctions, thereby providing the possibility for government to subsidise investments in the different sectors by re-investing the achieved revenues.”

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    Stuart O'Brien

    All stories by: Stuart O'Brien