Carbon price fall deprives Europe's green funds of billions

(Reuters, 18 Apr 2024) A drop in the European Union's carbon price this year could mean that a fund intended to be among the world's biggest schemes for new green technologies will be smaller than budgeted for and potentially jeopardise some low-carbon projects in the EU.

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 plunged as a result of 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, analysis of market data shared with Reuters by consultancy Veyt showed. While the dip in emissions shows 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 the climate efforts of member states.

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. By the EU's own estimates, the fund should raise 40 billion euros this decade, if CO2 prices averaged 75eur/t in that period. The benchmark EU carbon price has remained below this level for more than three months. It was trading at around 70eur/t on Wednesday.

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Reuters, 18 Apr 2024: Carbon price fall deprives Europe's green funds of billions