Carbon Market : the EU’s visible hand

 

9 months until the COP21 and the European Union finally sheds some light on the carbon’s market which is currently running out of gas.

Because of the excess of C02 quotas, the carbon’s price has dramatically dropped by 75% since the beginning of the economic crisis in 2008. Currently the ton of CO2’s price is set around 5€, quite far from the 30€ necessary to send a real incentive. In July 2013, Brussels froze 900 millions of tons until 2020. Only in 2019, new quotas will be allowed on the market.

The European Parliament Committee on Environment has adopted a reform proposal leading to freeze emissions quotas in the hope of a carbon’s price rebound.

 

The European Union’s hand is visible and aims to bring some stability by creating a reserve made from these frozen quotas.

Surplus Quotas

According to an estimation made by the European Commission, there was an excess of 2,1 billions of quotas in 2014. The decision was made to freeze 1,7 billions of quotas … in 2019 ! This means that for the next 4 years, unused quotas will pile up.

An estimation from Reuters said that this measure should lead to a rise of the carbon’s price to 25€ by 2025.

WWF’s analysis