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Europe’s industrial decarbonisation at risk amid sharp drop in CO2 price

(EurActiv, 4 Mar 2024) The sharp drop in the EU’s CO2 price, caused by high energy prices and political uncertainty, risks the carbon market’s credibility – and may become an obstacle to the bloc’s industrial decarbonisation.

The price of CO2 allowances under the EU Emissions Trading Scheme (ETS) has almost halved in one year. The price of a tonne of CO2 fell from €95 in February 2023 to €52 in February of this year.

These are worrying signals, given that the carbon price was put in place to encourage structural decarbonisation by giving businesses a long-term perspective – an effect that the sharp drop may turn on its head.

Producers of low-carbon energies are sounding the alarm: prices need to rise to decarbonise the economy by making the use of carbon-based energies less competitive.

“Low CO2 prices are slowing down the decarbonisation of the electricity sector: coal-fired power stations are producing before gas-fired power stations, which emit less,” Marion Labatut, director of European Affairs at the French state utility EDF, told Euractiv.

And “if [carbon] prices remain low and revenues are lower than forecast, the Commission could increase the volumes [of CO2 allowances] to be sold in 2025-2026, which would lead to a further fall in CO2 prices,” she adds.

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EurActiv, 4 Mar 2024: Europe’s industrial decarbonisation at risk amid sharp drop in CO2 price