Carbon Pricing In EU Hits A Record High

Carbon Pricing In EU Hits A Record High - Carbon Herald

The carbon pricing in the EU has marked a new milestone – €50 (or $60) per ton of CO2 emitted. The benchmark EU ETS carbon price reached €50.05 a ton on Tuesday which is the highest since the trading system launched in 2005. The new record has spurred interest in innovative new clean technologies like carbon capture and storage. 

“That makes a difference,” to the number of companies interested in commercial carbon capture and storage projects, according to Jon Christopher Knudsen CCO of Aker Carbon Capture Norway.

The higher the price on carbon emissions is getting, the cheaper the low carbon alternatives compared to fossil fuels will become. That would bring emissions cuts across industries and investments into alternative energy sources. 

Hydrogen is an example. If the carbon price is high enough, hydrogen fuel produced from renewable energy would be more competitive with hydrogen fuel produced from fossil fuels. Some analysts also predict that a carbon pricing of €90 per ton of CO2 is reasonable by 2030. 

Carbon Pricing Regulations Drive Low Carbon Technologies Growth

Stricter emissions regulations and strong will by the industry to decarbonize its activities are key drivers in the pace of deployment of low carbon technologies. The price of CO2 increased because of the new EU emissions target for 2030 to cut GHGs by 55%. 

The carbon price from 2012 to 2020 was below €10 per ton as the system was significantly oversupplied with allowances. EU regulators included measures such as the Market Stability Reserve that reduced the surplus of allowances. 

Carbon capture and storage economics could potentially improve significantly with tighter regulations and carbon cap in the same way as solar and wind energy technologies grew exponentially. Northern Europe is a leader in CCS development but other countries like India, Saudi Arabia, and China are in bigger need of decarbonization projects. However, due to a lack of incentives and political will, they are lagging behind with their energy transition compared to Western economies. 

The continuous rise of EU carbon price is a key driver of investments in CCS, hydrogen and other clean technologies. Costs are also coming down consistently due to increased competence and experience with the technology. 

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