A Thompson Reuters report on EU energy and climate policy has concluded that stricter regulations, based on proposed reforms to the European Emissions Trading System (ETS), will raise the EU carbon price to an average of €23/t between 2021 and 2030.
Stricter regulation, argues the report, will force up the price of emission permits, currently valued at €6/t.
The sharp increase in carbon price to €23/t is dependent on proposed reforms to the ETS that would limit the amount of permits available in the bloc. One proposed reform is a Market Stability Reserve, which would manage the supply of allowances more efficiently.
Without this, the report states, the carbon price is likely to only increase to around €14/t through the 2020s.
However, if the EU adopts the proposed energy reduction targets, partnered with the lowering of carbon emission rates of 40% compared to 1992 levels and a overall share of 27% for renewables in the energy market, the EU will be on a “substantially lower emissions trajectory”.
The report adds, “Our forecast suggests that rising carbon prices will improve the ability of gas to compete with coal and incentivise emission reductions among European manufacturers.
“We estimate the carbon price will trigger reductions of around 1.7 billion tons 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.”
Recently, however, the EU’s emission reduction targets have been threatened by the planned development of a string of lignite coal plants, which activists say could add 118 million tonnes of carbon dioxide to Europe’s annual emissions.
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