Carbon allowances rose to their highest level since December 2012 on Monday 24 February at €7.76 per metric tonne of carbon emitted, as leaked documents from Brussels lawmakers seemed to show a consensus on when to introduce a market stability reserve (MSR) ahead of the Tuesday vote.
The policymakers agreed on Tuesday to put the MSR in place from December 2018 to absorb the backloaded supply of carbon allowances rather than allow them to re-enter the already over-supplied market place. By reducing the glut of allowances it is expected that the price of carbon will begin to rise to a level which might incentive low carbon investment.
A carbon analyst at Thomson Reuters’ Point Carbon unit told Utility Week that the leaked document had signaled a “strong political will to reform the market” earlier than expected by market participants.
Whereas prices had begun to fall the week before on concerns that a strong agreement might not be reached, Monday saw a rally of 5 per cent following the increased political support.
UK energy secretary Ed Davey along with either other EU ministers called for an even earlier start date of 2017 in a letter made public ahead of the vote.
Stronger carbon emissions prices are sorely needed following the post-recession collapse of the market, in order to provide investors in low carbon power options “the certainty needed to create investment, jobs and growth as we move to a low-carbon economy,” Davey said.
“Delay will only cause investor uncertainty, raise costs for businesses and ultimately leave consumers to pay the price,” he warned.