Brussels (Brussels Morning) The benchmark price of EU carbon permits rose above 70 euro per tonne on Monday, reaching the highest level since the bloc first introduced them in 2005.
The December 21 EU Allowance (EUA) contract reached 70.43 euro before dropping to 69.77 euro, according to Reuters reporting.
The EUA price has been rising continuously since the start of the year, when it stood at roughly 35 euro, and has now increased by more than 110% so far in 11 months. Monday was the sixth consecutive day that the price of EUAs reached a new record high.
US-British Refinitiv financial services company analyst Ingvild Sørhus noted that lower temperatures and wind power output in recent days opened the way for generating more power from fossil fuels, which could explain the increased demand for EUAs.
“That said, with Europe being the epicentre of the COVID-19 pandemic, worries over more lockdown measures and lower activity could weigh on markets and also carbon”, she said.
Analysts pointed out that the soaring natural gas prices made power generation from coal more profitable than gas-powered plants despite the growth of EUA prices. Generating power by burning coal emits approximately two times more CO2 compared to natural gas and requires proportionately more carbon permits.
Energy prices unstable
Meanwhile, oil prices dropped on Monday as a new wave of COVID-19 infections spreads across Europe, giving rise to predictions that demand will drop, Reuters reports.
In addition, Japan announced it might release oil reserves, which could lead to oversupply coupled with an expected decline of demand.
Prime Minister Fumio Kishida noted on Saturday that Japan is prepared to help in the fight against rising oil prices by releasing its reserves.
Moreover, the Libyan National Oil Corporation approved new production on Monday and the resultant increase in output will put additional pressure on prices.
Also on Monday, Saudi state media triggered new fears about additional global supply chain disruptions in reporting that the conflict in Yemen represents an imminent danger to global trade routes and navigation south of the Red Sea.