European carbon prices hit a 10-year high on Wednesday, driven by higher natural gas prices, the rising chance of a Brexit delay, and rules that crimp the supply of emissions allowances that polluters can buy. Prices for the benchmark December 2019 carbon futures contract in the EU emissions trading system rose to a high of €26.89, capping a 30 per cent increase since the end of last month. EU carbon allowances, which are bought by power plants and industrial manufacturers to offset each tonne of carbon dioxide that they produce, were the world’s best performing commodity last year. Prices tripled in 2018, but eased off in the first quarter of this year. Per Lekander, who manages more than $1.1bn in a commodities hedge fund at Lansdowne Partners in Mayfair, told the Financial Times that while EU carbon prices had been weighed down by the slide in gas prices at the start of the year, the fact they had not collapsed underlined the strength of the underlying market. New policies that took effect in January have tightened the market, with the introduction of a so-called “market stability reserve” that has reduced the availability of carbon allowances. When gas prices rise, utilities are more likely to burn coal to meet power needs, pushing up carbon emissions and the demand for carbon allowances.
FT 10th April 2019 read more »
