The price of carbon credits in the EU has hit the highest level in a decade in a move that should start to encourage switching to cleaner fuels. The jump in prices, which rose above €20 a tonne and have almost tripled this year, is a victory for the EU which has worked to reform its carbon trading system after a decade-long slump in prices following the financial crisis. That arguably slowed the phase-out of coal and other highly polluting fuel sources. But the steep advance in the price of carbon credits, which large utilities and manufacturers must purchase to offset their emissions under the EU’s Emissions Trading System (EU ETS), is also likely to have a major impact on those businesses as they are hit with higher bills. “Industry had got accustomed to prices that were comparable, for a tonne of CO2, to buying a latte,” said Bernadett Papp, senior market analyst at advisory firm Vertis Environmental Finance. “We expect prices may need to reach €25 to €30 a tonne to really encourage fuel switching.” A number of factors have sent the carbon price higher, but the most important long-term driver is the EU’s creation of a so-called “Market Stability Reserve” that is designed to mop up excess carbon credits that had built up in the past decade.
FT 29th Aug 2018 read more »
A push to reduce the development of coal mines along with increasing pressure from investors to divest from fossil fuels is creating a split in the mining industry between companies exiting the sector and those vowing to remain. Deutsche Bank and Royal Bank of Scotland are among banks that have stopped lending for new coal mines, and spending on new projects has fallen 80 per cent from $10bn in 2012 to $2.2bn in 2018, according to analysts at Citi. This trend, plus a government-led campaign in China to cut domestic coal supply to reduce pollution, has caused the coal price to almost double over the past three years to trade at $113 a tonne. For those companies that are remaining, or even expanding their presence, the sector is a delicate balancing act for an industry that faces more investor scrutiny on its environmental record. Coal provides about one-third of the world’s energy but is a leading contributor to climate change.
FT 28th Aug 2018 read more »