EU Carbon Permits Trading at Around Record High €100 per Ton

Benchmark European carbon prices hit a record on Monday, approaching €100 per ton, with cooler weather forecasts and expectations of lower wind output driving up demand. The benchmark EU Allowance (EUA) December 2023 contract closed at €98.3 a ton, up 2.1% since Friday’s close and having earlier neared a record high of €99.99 a ton. EUAs are the main currency used in the EU’s Emissions Trading System (ETS), which manufacturers, power companies and airlines are required to pay for each ton of CO2 they emit as part of the bloc’s efforts to meet climate targets.

Cooler temperatures on top of low wind power output mean there is likely to be an uptick in demand for fossil fuel-powered electricity. Those plants need to buy carbon permits to cover their emissions.

Temperatures in Northern Europe are now projected to go below seasonal averages next week, which might instigate utilities to increase their hedging activities.

The benchmark contract has increased by almost 20% since the start of the year, partly on expectations that European economies would begin to improve as energy prices fall from record highs.

Speculative buying has also helped to push prices up this year, traders said.

Visibility, however, on positions taken by financial institutions has shrunk since the ICE exchange, which is one of the main trading platforms for emissions, has been unable to publish Commitment of Traders (COT) data this month due to technical issues.

In an update posted on its website on Friday, ICE said it “aims to publish the files as soon as possible, subject to confirming the accuracy of the data.”

Although the carbon contract failed to break the €100 mark on Monday, the threshold is soon expected to be passed.

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