Carbon Price Reaches A New High at €50/t

The benchmark European Union Allowance  (EUA) carbon price  climbed above €50 a tonne for the first time on Tuesday 4 May, the highest level since the EU’s Emissions Trading System was launched in 2005. This increase in the price of carbon has been anticipated and is positive for Ireland’s developing agri-biomethane industry.  A strong carbon price is one of the measures that can partly offset the cost of renewable gas production and will incentivise industry to do more to decarbonise.  EU Taxonomy recognises biomethane as sustainable, hence making it attractive to investors and industry consumers.

The EU’s ambition and member states’ legally binding targets to cut net greenhouse gas emissions by at least 55 per cent by 2030, from 1990 levels, is behind the increased price of carbon. This is because carbon emissions trading is widely agreed to be the most efficient way to incentivise a reduction in GHG emissions. While there may be some variations, analysts generally agree that the upward trajectory is likely to continue.

The EU is expected to present a plan to reform the carbon market later this year, to cut emissions faster over the next decade. For industry, that will likely mean a reduction in the free carbon permits the EU currently gives companies to protect them from competitors in countries without a carbon price. The EU Commission is likely to introduce a Border Carbon Adjustment for importation of goods and products from regions with a higher carbon footprint but cheaper production costs as a result.

While the increased price of carbon is welcomed, some commentators are cautioning that the transition to a green economy must be a just transition and that action is needed to avoid social and economic disparities within the EU. To this end the EU has adopted a Just Transition Fund worth €17.5bn to cushion the social impact of the transition. Frans Timmermans, the vice-president of the European Commission, has coined the phrase : “This will be a just transition, or there will just be no transition.”

Ref: The Irish Times 5 May, Euractiv.com with Reuters, 5 May