Emissions covered by EU pricing markets fell 12% in 2020

Emissions regulated under the European Union's (EU) carbon market decreased by more than 12% last year, with the coronavirus severely limiting energy demand and industrial output.

Emissions covered by EU pricing markets fell 12% in 2020

A drop in energy demand and increased uptake in renewables are accountable for parts of the decline

New analysis from Refinitiv Carbon Research of verified emission data published by the European Commission has found that greenhouse gas emissions under the EU’s carbon markets decreased by 12.6% in 2020 to 1339 megatonnes.

According to the research, the EU carbon market dropped by 192 megatonnes compared to 2019, which is the largest recorded decline since the launch of the carbon market.

Refinitiv’s lead carbon analyst Ingvild Sørhus said: “The substantial drop in emissions is the fallout from pandemic with economic activity shrinking last year and renewables displacing fossil-fired power.”

The EU’s GDP shrank by 6.4% last year, while power sector emissions continued a downward trend, not just due to falling energy demand, but also more renewables integration. Emissions from power and heat reached 630 megatonnes in 2020, down by 17% compared to 2019.

Emissions from industrial manufacturers decreased by 8% due to reduced outputs as a result of the pandemic, while emissions from intra-EU flights fell by 60%.

Despite the large drop in emissions, European carbon prices remained consistent in 2020, Refinitiv notes, at one point reaching a record high of €44 per tonne.

Pricing increase

Refinitiv research recently claimed that carbon prices across the EU could increase by more than 50% over the next decade, with the bloc’s proposed 55% reduction in emissions set to shape renewables and fossil fuel markets in the long run.

The research suggests that the average carbon price between 2021 and 2030 will surpass €30. Beyond 2030, the price would increase again to beyond €50. In comparison, the EU carbon price reached €15 in May 2020, as a result of the coronavirus, its lowest level since 2018.

In comparison to Refinitiv’s predictions, the International Emissions Trading Association (IETA) predicts that the average carbon price in the EU throughout the 2020s will be €32 per tonne of CO2 equivalent. This is an increase on the €27 average recorded between June 2018 and June 2019 but falls short of the €50 which think-tank Carbon Tracker has concluded would be necessary to decarbonise the bloc’s most-emitting sectors and nations in line with its Green New Deal climate targets.

The EU looks set to revamp its Emissions Trading System as part of the new targets. Expected reviews and proposals are due in Summer 2021.

Matt Mace

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie