European carbon price floors and the effect on gas

A nuclear power plant in France. (EDF)

Reforms to the EU’s Emissions Trading System have helped trigger a recent rise in allowance prices, which briefly hit €14 per ton ($17.2/t) last week. At the time of writing, the benchmark December 2018 contract was trading at around €13/t on the ICE exchange. However, the recent gains, and the potential for more short-term increases, are not translating into confidence in prices in the mid-to-long term. 

Although the EU is bringing in further reforms to help stabilise allowance prices, including the Market Stability Reserve (MSR), they...