On 21st February 2023 the EU carbon price hit a new record EUR 104/ AUD 162, representing one tonne of carbon dioxide equivalent (tCO2-e) stored or avoided by an approved project. The price 12 months ago was EUR 90.78/ AUD 141 and represents a 15% increase as well as exceeding forecasts. The price of carbon credits in Europe has risen fivefold in the last three years.
“The fundamental point about this market is the EU has cleared the way for higher prices as that is what is ultimately needed to meet their aims of cutting emissions,” said Mark Lewis, head of climate research at hedge fund Andurand Capital Management. New rules agreed in December and in the process of being ratified, which will effectively see emissions allowed under the scheme falling to zero by 2039, are the “long-term structural bullish driver of this market”, Lewis added.
Under the Carbon Border Adjustment Mechanism companies importing into the EU in certain sectors - iron, steel, cement, fertilisers, aluminium and electricity – are obliged to purchase carbon credits. This will have a major impact on the value of goods in international supply chains and incentivise companies to reduce emissions in products ending up in the EU.
Reference – Financial Times February 2023