Belgium, (Brussels Morning Newspaper) The price of EU carbon emissions reached 100 euros per tonne of CO2 on Tuesday, with EU Allowance contracts trading at 100.49 in the afternoon.
Under the EU Emissions Trading System (ETS), power companies, manufacturers, and airlines have to pay for their CO2 emissions to strengthen the green push, according to Reuters reporting on Tuesday.
EU pointed out that pricing fossil fuels out of the market will incentivize companies to turn towards renewable sources of energy and fuels with lower emissions.
Under EU rules, companies have to buy CO2 permits to cover their 2022 emissions by April, with traders noting that the approaching deadline helped to drive up prices.
They reminded that demand for permits in the power sector increased last year as some bloc members turned towards coal to replace lower natural gas supplies from Russia.
Poland previously expressed concern over permit prices, calling on the EU to limit price spikes, while Spain called for a price cap on permits as part of a package to rein in inflation.
Some bloc members see rising prices in a positive light, stressing the importance of strengthening the green push to reach environmental goals.
The price of permits started to rise in 2018, when the bloc tightened the supply, and rose sharply in 2021 when the EU introduced stricter environmental rules.
The EU is planning to remove free carbon permits for the production of steel and cement and introduce a carbon levy on imported goods to boost the competitiveness of companies in the bloc.
While the carbon tax in the EU stands at roughly 100 euros per tonne, the equivalent in China is below 10.
According to analysts, the EU carbon price could drop below 100 euros as the bloc decided to auction more permits on Tuesday.
Marcus Ferdinand, head analyst at Greenfact market intelligence company, pointed out “traders seem to neglect the short-term impact of additional supply entering the market… and rather focus on the mid-to-long-term picture.”
“I expect a correction as soon as the changes to auction calendars are announced,” he concluded. Mark Lewis, head of climate research at Andurand Capital Management, pointed out that exceeding the 100 euro level does not mean CO2 prices will remain above it.