EU Is Monitoring Carbon Market Situation in ‘Challenging Times’

(Bloomberg) -- The European Union’s executive arm is monitoring the developments in the world’s biggest carbon market after concerns over the impact of the coronavirus on the economy and industrial output slashed prices of allowances last week by the most since 2014.

“We are aware that these are challenging times for financial markets, including the carbon market,” the European Commission said in a reply to questions from Bloomberg. “We are following the situation closely.”

The EU Emissions Trading System is the bloc’s flagship climate policy tool, imposing declining pollution caps on thousands of companies from utilities to manufacturers. The market was designed in a way that allows the price of emissions to reflect broader economic conditions.

Measures proposed by the EU to prop up the economy will also help companies in sectors covered by the emissions market. Commission chief Ursula von der Leyen announced earlier this month a 37 billion-euro ($40 billion) “Corona Investment Fund” that would use spare money from the EU budget to help businesses, health-care systems and sectors in need.

Benchmark allowances for delivery in December slumped more than 26% last week. And in the five sessions through March 18, futures plunged as much as 32%. On Monday, the extended their decline, sliding as much as 9.1% to 14.65 euros per ton, the lowest since June 2018.

“The corona virus outbreak is a severe public health emergency for our citizens, societies and economies with infections in all member states,” the commission said. “It is also a major economic shock to the EU. The Commission will continue ensuring an appropriate policy response.”

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