The price of carbon in the EU emissions trading market will have to rise above current levels to drive new investment in clean technology, the European Commission's energy chief Andris Piebalgs says.
The EU Emissions Trading Scheme (
EU ETS) puts a price on carbon dioxide (CO2) emissions in twofold approach to reducing emissions. In the short term, the aim is to encourage heavy emitting industries to take measures to lower emissions from their current technology. The longer term aim is to spur investment in new low- or zero-emission technologies.
But, according to a report in the Financial Times, Piebalgs says that at current levels carbon prices are not enough incentive for significant clean-tech investment and will need to rise. He forecasts the price of a carbon permit in the third phase of the EU ETS from 2012 will need to be €20 to €30. Each permit, an
EUA, is a licence to emit one tonne of CO2.
Permits for phase two of the EU scheme have traded in the range of €12 to €20 over the past six months with the December 2012 forward contract currently trading at €16.45 on the European Climate Exchange.
The third phase of the EU ETS is not yet agreed in the EU and depends somewhat on the emergence of a successor treaty to the Kyoto Protocol which expires in 2012.
However, EU leaders are currently meeting in Brussels to consider a proposal to commit to a target of reducing emissions by 20 per cent by 2020. Acceptance of the target would provide a solid underpinning for the EU ETS up to that time.
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