EU leaders are struggling with the price of carbon as electricity prices rise

A group of EU leaders has called for Brussels’ intervention to help reduce carbon prices, saying the market change was to increase electricity prices and exacerbate Europe’s fifth gas crisis.

The European member states, led by France and Spain, Poland, Hungary, Latvia, and the Czech Republic, have criticized the European Commission’s claim that there is nothing wrong with the EU’s carbon market, as it faces problems over electricity prices.

The concerns were raised at a summit of EU leaders in Brussels on Thursday, after gas prices in Europe earlier this week skyrocketed since October. The shortage of gas has given impetus to power producers to switch to low-cost but highly polluting coal.

The price of carbon under the bloc emissions process rose by more than € 90 per ton of carbon dioxide last week.

Extreme pollutants are forced to buy subsidies under the system to protect their carbon footprint, in an attempt to put a price on black oil and prevent greenhouse gases that cause global warming.

But EU ambassadors told FT that several leaders wanted the Commission to reconsider the price changes in the cap and trade regulations on emissions. Some say they are directly involved in the political process in the marketplace.

The sharp rise in the price of carbon fuel from € 50 at the end of July to € 90.75 last week has brought predicting that he could climb to a minimum €200 in the coming years when availability is declining.

The carbon market is closely monitored by a Commission that regulates the amount of payments in the system.

Over time, carbon emissions are driven by EU commitments to reduce greenhouse gas emissions by zero by 2050.

Poland, which relies on coal for about 70 percent of its energy, has become one of the main opposers of efforts to make coal more expensive through the carbon market. Prime Minister Mateusz Morawiecki told EU leaders that the ETS was taking “money from the poor to give to the rich”, said a well-known diplomat.

French President Emmanuel Macron and Czech Prime Minister Andrej Babis also criticized the EC’s assessment that there was little evidence of market sentiment.

Brussels last month commissioned two agencies, the European Securities and Markets Authority and the EU power agency ACER, to conduct a comprehensive trade management study to address concerns about ETS pricing changes. Preliminary analysis found no evidence of error.

The commission also insisted that the plan, which is a major component of EU emissions mitigation measures, benefits all member states of the EU by providing them with additional funding for trade.

Brussels estimates that rising carbon credits have made at least € 11bn the value of EU governments this year compared to 2020. It also estimates that only 10-13 percent of the current rise in energy prices could be due to higher carbon prices. .

At this week’s meeting, one of the leaders urged the Commission to set a low carbon footprint so that it does not overstay, said diplomats who are familiar with the issues. Some countries have also stated that the amount of funding to help reduce prices.

German Chancellor Olaf Scholz, after appearing at his first meeting, defended the ETS but also expressed concern over the cost, he said. Germany is one of the main contributors to the carbon markets, and has developed a comprehensive CO2 trading strategy.

However, it is due to close 4GW of nuclear power this year, which should increase fuel consumption and the need for EU debt.

Increasing levels of pollution come amid EU controversy over the development of ETS for groups such as cars and homes. The idea has met with fierce opposition from France, Spain, Portugal and the eastern bloc, where it is said to offer direct tax to consumers who cannot afford to change their cars and household goods for those with less gas.

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