EU carbon price set to rise to €23 per tonne between 2021 and 2030

2nd September 2014


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  • Air ,
  • Pollution & Waste Management ,
  • Conventional

Author

Luis Mariano Miranda Duran

Reforms to the EU emissions trading system (ETS) could raise the carbon price to an average of €23 per tonne between 2021 and 2030, according to a report from Thompson Reuters.

The report covers a range of EU climate and energy policies that are significant factors in determining carbon prices, but says proposals to reform the ETS are crucial and describes the planned market stability reserve, which will adjust the supply of permits to changes in demand, as “the single most important factor for the future carbon price”.

The proposed market stability reserve would make carbon prices more stable by controlling the surplus of ETS permits that has built up in the system and allow adjustments to the supply of new allowances. Using these mechanisms, Thompson Reuters forecasts an average carbon price of €23 per tonne during 2021–30, depending on changes in demand.

“Our analysis of the proposal suggests that such a mechanism will play a major role in supporting the future European carbon price. Without it, we see the carbon price averaging €14 per tonne in the 2021-2030 period,” says the report.

It also calculates the potential benefits of other EU climate and energy policy proposals affecting both carbon prices and emissions reduction. These include a proposed 30% cut in energy consumption, a renewables share of final energy consumption of 27% by 2030 and a planned 40% reduction in CO2 emissions by 2030 against 1990 levels.

When these measures are combined with the market stability reserve, Thompson Reuters estimates “reductions of around 1.7 billion tonnes of CO2 from now up until 2030.”

“However, a failure of the EU to adopt the commission proposal for a stability reserve will likely result in around half as many emission reductions, underscoring the impact of the proposal on future climate policy,” says the report.


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