Carbon below €5/t raises fresh questions about ETS
A coal-fired power station in the UK. The country’s carbon price floor has encouraged a switch to gas. (E.On)
Carbon allowance prices have fallen steeply in recent months, prompting new questions about the relevance of the Emissions Trading System (ETS) as the EU’s main method of reducing carbon dioxide emissions.
Although the number of surplus allowances – estimated at 2 billion – will be reduced when the Market Stability Reserve (MSR) takes effect in 2019, some are saying the EU’s reforms of the system do not go far enough. For example, the UK has introduced a carbon price floor, which has caused a switch from coal to gas in the power sector and which other countries may be tempted to copy.