Prices for UN-backed carbon credits sank to a record low in morning trading on Wednesday after doubts emerged about European Commission plans to prop up the bloc’s ailing emissions trading market.
Benchmark prices for certified emission reduction credits fell as much as 12.9 per cent from the previous day to a record low of €2.86 in early trading – a decline of 31 per cent from the start of July.
Allowances traded in the European Union’s emissions trading system, which the CER credits normally track, fell to a low of €6.80, down 11.5 per cent on the day and their lowest point since mid-June, before recovering to €7.18 later in the day.
Carbon prices have fallen to fresh lows at several points over the past nine months as a glut in the supply of EU credits has been exacerbated by sagging demand due to weak European economic conditions.
Some analysts believe carbon credits need to cost as much as €50 to drive the low-carbon investment that is a central plank of UN policy, so some EU countries, including Denmark and the UK, have been pushing for a plan to bolster the market. Others, such as Poland, which generates about 90 per cent of its electricity from carbon-intensive coal plants, have strongly opposed such moves.
However, Connie Hedegaard, the EU climate commissioner, said in April that she would publish a review of the carbon market before the summer holidays. This was expected to shore up prices by delaying sales of new allowances from next year – a temporary fix that it was thought could be done through regulatory changes.
