Isra-Mart srl:Carbon price breaks €17 mark as Germany shuts nuclear plants

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German Chancellor Angela Merkel has this morning confirmed seven nuclear power plants built before 1980 will close for at least three months in response to safety fears sparked by the ongoing crisis in Japan.

The price of carbon soared to a high of around €17.25 (£14.95) on the news as traders predicted coal and gas-power will be used to cover the unexpected shortfall in German power output.

The exact procedure for closing down the seven plants is expected to be announced next week and the reactors will stay shut for at least three months while safety checks are carried out.

Analysts speculated that a number of the older plants may not be permitted to re-open, further fuelling demand for EU carbon allowances.

"The plants might not come back, it is all very unclear," Said Stefan Wachter, analyst at Thomson Reuters Point Carbon. "Coal and gas are the only stopgap in the short to medium term. Whatever way you look at it there will be more carbon emissions and that is driving up the price of carbon."

Energy and industrial firms currently hold a surplus of EU Allowances (EUAs) as a result of relatively low levels of emissions during the economic recession.

But Wachter said that the prospect of a lengthy nuclear shutdown could eat into that surplus – a scenario that could limit the number of allowances firms will be able to carry over into the next phase of the EU ETS from 2013 – and drive up long-term carbon prices.