Crunch Time for EU Green Talks With CO2 Prices Near Record

(Bloomberg) --

Europe is moving to a crucial stage of the debate over its green shift this month as politicians are set to discuss how fast to cut emissions.

European Union lawmakers will make a series of decisions on climate policy from next week that are likely to boost volatility in the EU carbon market, where prices are trading close to a 14-year high.

At stake is the pace of cutting emissions in the European Green Deal as the 27-nation bloc seeks to recover from the deepest recession in generations. A tighter emissions target will support higher carbon prices.

“In the coming weeks it will be the political decision-making on the Green Deal and the climate law that will define the market volatility,” said Bernadett Papp, a carbon analyst at Vertis Environmental Finance in Budapest.

The European Parliament’s committees will start voting on a landmark law next week to eliminate greenhouse gases by the middle of the century. It will become the legal backbone of the EU Green Deal, a climate strategy that will affect everything from energy generation to transport and farming.

The climate law needs approval by the European Parliament and national governments, with each of them entitled to seek amendments to a draft put forward by the European Commission in March.

The commission is also planning to propose a self-amendment toward the end of September: a new 2030 target to cut emissions, most likely by 55%. The current goal is a reduction of 40% from 1990 levels.

“The coming months will be a crucial time for translating the Green Deal into concrete targets and actions,” EU Energy Commissioner Kadri Simson said.

The German government, who holds the rotating EU presidency until the end of this year, expects the commission to propose this month an emissions-reduction target for 2030 at the upper end of the 50%-55% range in consideration.

A commission proposal to boost the goal to 55% would be “definitely positive” for the carbon market, where many investors are already betting on such a decision, according to Mark Lewis, head of sustainability at BNP Paribas Asset Management.

“The risk would be if the commission recommends only 50%; that would be a very disappointing announcement to the market,” he said.

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