A new report from information firm Thomson Reuters predicts the European carbon price is expected to rise over the next decade, increasing to an average of €23 per tonne between 2021 and 2030.
The report, which analysed European energy and climate policy, concludes that stricter regulations imposed as a result of reforming the European Emissions Trading System (ETS) will bump the carbon price higher, or face a lacklustre policy towards the region’s climate goals.
“The single most important factor for the future carbon price is the European Commission’s proposal to reform the current carbon market,” Thomson Reuters concluded. The Market Stability Reserve reform proposed in January would manage the supply of permits “depending on changes in demand”, a process that would make carbon prices more stable.
Without such reforms, however, Thomson Reuters predict that the carbon price will only average €14 per tonne in the 2021-2030 period.
Europe’s current carbon price stands at a measly €6 a tonne, serving to encourage only small emission reductions across the region. Thomson Reuters, however, believes that this is likely to change as the European Union steps up attempts to reform its climate policy through and well after the 2020 deadline for current policies.
Our forecast suggests that rising carbon prices will improve the ability of gas to compete with coal and incentivize emission reductions among European manufacturers.
Thomson Reuters’ predictions assume that the European Union adopts a 40% emission reduction target, a 27% renewable energy target, and a 30% energy efficiency target for 2030, along with the Market Stability Reserve proposal already put before the European Commission.
Such targets will push the carbon price higher, triggering emission reductions of approximately 1.7 billion tonnes of CO2 from now up until 2030. Without the Market Stability Reserve, however, Thomson Reuters predict the emissions reduction will struggle to reach half that with the proposal in effect.
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