European Carbon Permits Rise to Record After COP26
European Carbon Permits Rise to Record After COP26
(Bloomberg) -- European carbon futures climbed to a record, following an agreement at the COP26 summit that seeks to reduce the use of fossil fuels and boost nations’ climate targets.
Benchmark prices rose as much as 5.9% to a record 66.97 euros ($76.25) a metric ton on ICE Endex on the first day of trading after the summit in Glasgow, Scotland. Making polluters pay for carbon permits is seen as a key way to cut emissions in Europe, and the European Union plans to extend the bloc’s trading scheme to more sectors.
In the short term, a 6% jump in natural gas prices on Monday -- the third consecutive increase -- has improved the profitability of burning coal, creating more demand for carbon permits. While gas prices have fallen from record levels last month, they still remain historically high, even before the start of the winter heating season.
The EU carbon price has been relatively flat in recent weeks despite volatile swings in the prices of gas and power.
“That price stability within a more chaotic energy price mix gave a lot of people and some new investors more confidence,” said Casey Dwyer, a portfolio manager at Andurand Capital Management LLP. The focus on carbon trading at the climate talks in Glasgow has also spurred investment in the EU market, he added.
“We’re still bullish” on carbon, Dwyer said.
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