Europe’s carbon prices set to double in five years

Sophie Chapman
- Finance - Aug 21, 2018

Carbon prices in the European Union (EU) are anticipated to double to €40 (US$46.10) per tonne in the coming five years.

Between 2019 and 2023 the carbon prices will rapidly increase, encouraging the transition to cleaner energy, claims Carbon Tracker.

The think-tank predicts that the fossil fuel price will average between €35-€40 ($$40.34-$46.10) per tonne in the coming years, and could reach €50 (US$57.63) per tonne during the winters of 2020-2021 and 2021-2022.

The recent forecast on the price of carbon predicts that prices will increase at a faster pace than previously anticipated, which could leave coal plants unprofitable.

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The price of carbon has increased by three times as much between May 2017 and August 2018 – from €4.38 ($5.05) per tonne to €18.28 ($21.07) per tonne. The sharp rise in prices follows reforms to the EU Emissions Trading System.

“Bullish as we remain about the prospect of further rises, we think prices are effectively capped around €50,” remarked Mark Lewis, Lead Authority on Carbon Markets at Carbon Tracker.

“At this price, a combination of fuel-switching, cheaper renewable energy, political pressure and the sale of surplus carbon allowances by speculators would limit the duration of excessive prices.”

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