- The cost of EU carbon permits had nearly halved by February as emissions covered by the market dipped.
- EU carbon revenues so far in 2024 are 30% less than if carbon auctions had achieved the average 2023 price.
After soaring above 100 euros per ton of CO2 last year, the cost of EU carbon permits had nearly halved by February, as emissions covered by the market dipped due to lower power demand and higher renewable power generation.
The fall has wiped out 4.1 billion euros ($4.36 billion) in potential revenues for Europe’s budget for low-carbon investments so far this year, according to an analysis of market data shared by consultancy Veyt.
While the dip in emissions shows that the carbon market is helping the bloc meet its climate goals, it also means the scheme is raising less than expected for EU green transition funds and to pay for member states’ climate efforts.
The EU Innovation Fund is the bloc’s main fund for nascent technologies like hydrogen and carbon capture, which the 27-nation bloc is banking on to meet climate change goals.
According to the EU’s estimates, the fund should raise 40 billion euros this decade if CO2 prices average 75eur/t. The benchmark EU carbon price has remained below this level for over three months. It was trading at around 70eur/t yesterday.
“If there is less money, it will affect the number of projects the funds can support,” LSEG carbon analyst Yan Qin said. The carbon market also feeds a Modernisation Fund to help the poorest EU countries shift away from fossil fuels.
Veyt carbon analyst, Ingvild Sorhus said prices are being dampened by short-term factors, including a recent EU move to sell millions of extra carbon permits to raise money to help countries quit Russian gas.