Bull run in EU carbon prices takes market by surprise

The prospect of an early agreement on ETS reform following statements by Germany and France caused allowance prices to climb this week
By Andreas Walstad 8 September 2017
A German coal-fired power plant The Lippendorf coal-fired power plant in Germany. Carbon prices are not high enough for coal-to-gas switching. (Vattenfall)

Prices for EU carbon allowances rose sharply this week after Germany and France pledged to push for an agreement on reform of the EU’s Emissions Trading System (ETS) before November. 

The bellwether December 2017 contract for allowances was trading at a high of €7.11 per ton ($8.56/t) on the Intercontinental Exchange on Friday morning, 22% above last Friday’s close. Thursday’s closing price of €6.90/t was the highest close since January 2016, according to ICE data. 

The bull run took market observers by surprise because the...

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