Report: EU carbon prices could hit €55 by 2030

That is according to a new report from think-tank Carbon Tracker, which claims that these prices would render even the most efficient coal power plants unprofitable.

Reforms to the EU-ETS cap-and-trade system have already seen the price of carbon triple from a low of €4.38/tonne in May 2017 to €13.82/tonne in April 2018, making them the world’s best performing energy commodity over the past 12 months.

“Life is set to get much tougher for EU coal generators,” said Carbon Tracker’s lead authority on carbon markets Mark Lewis.

“Higher carbon prices will eat further into operating margins that have already been severely eroded by the growth of renewables, forcing less efficient coal plants off the grid altogether. Under a Paris-compliant EU-ETS cap the shock to coal would be even greater, forcing all coal and lignite plants – even the most efficient – either off the grid or to the margin.”

EU carbon prices are on course for €25-€30/tonne by 2020-21. But the report contends that these would need to ramp up, alongside a rise in the EU’s 2030 emissions reduction target from 40% to 55%, to align with the Paris Agreement.

EU governments last month called on the European Commission to draw up a proposal for a long-term emissions strategy in line with the Paris Agreement within a year.

Lewis said that carbon pricing “won’t be sufficient” on its own to achieve the Agreement’s goal to keep global warming well below 2C, but insisted that it does have “a vital role to play”.

Name your price

Emissions trading systems are springing up in various parts of the world, such as New Zealand, South Korea and California, which is in talks with the EU to potentially create a common carbon market. Last December, China signalled its intent to address climate change with the launch of the world’s largest carbon market.

Carbon pricing policies now cover between 20-25% of global greenhouse gas (GHG) emissions, according to new research. As of April 1 2018, 46 countries and 26 provinces or cities have adopted market-based carbon measures, the Institute for Climate Economics (I4CE) has found.

Such policies generated revenues of $32bn in 2017, up from $22bn the previous year. But the French think-tank said that prices are too low to meet the Paris Agreement targets. More than 75% of emissions regulated by carbon pricing are covered by a price below $10, a figure which researchers say would need to rise to between $50-$100 by 2030 to keep the world on a 2C trajectory.

George Ogleby