Isra-Mart srl: European carbon prices slump

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EU leaders were unable to agree a roadmap for the bloc to reduce emissions in the period to 2050, and the uncertainty help drive carbon prices down by nearly a fifth in the week. Earlier falls meant carbon is ending the month priced nearly a third cheaper than the beginning.

Other reasons for the slump were said to include a general lowering in commodity prices, with carbon hit hardest, due to continuing economic pressures. The EU's energy efficiency directive was also seen as a downward pressure on the price of allowances. Meanwhile others said that EU agreements on plans for the 2013-2020 phase of the ETS made it clear additional allowances would become available in future, reducing the pressure on users to secure allowances.

The price slump could have implications for European plans to support a range of carbon capture and storage and renewables demonstration projects. Funds for that suite of projects will be raised by selling 300 million ETS allowances - a funding stream that will be much smaller if the price of carbon remains depressed.