The price of CO ₂ has fallen by 25 percent from the start of the pandemic to 2018 values

The price of emitting a ton of CO2 since the coronavirus crisis began has fallen by 25 percent in the European Union, to 2018 levels, according to data from the consultancy Factor Ideas For Change, specialized in carbon markets.

Thus, the price of CO2 emission rights in Spain has gone from 24.50 euros per ton of CO2 at the beginning of the year to 17.55 euros per ton of CO2 at the end of March.

Thus, since the beginning of 2020 the market has suffered several circumstances, such as Brexit, the European Green Deal or the coronavirus. Precisely, the latter has been the one that has caused a sharp decrease in the price of CO2.

Precisely the price of oil, coal, natural gas and CO2 among others as well as the main financial indices are being affected by the health crisis.

In February, the price of CO2 ranged between 23.11 and 25.66 euros per ton while in the last month of March it fell to range between 17.55 and 23.49 euros per ton, with an average of 19.82 euros per ton, that is, a decrease of 20 percent compared to the average of 2019, which was 24.85 euros per ton of CO2.

For Factor Ideas For Change, in the EU this decline is due to the strong correction of the first 20 days of March, due to the accelerated exit of investment funds and the sales of other financial actors, such as options traders.

However, the consultancy sees “impossible” to establish what will be the floor of the price in the short term, although in the medium or long term it trusts in a stabilization of the markets.

The partner and head of the Markets Division of Factor Ideas for Change, Iker Larrea, commented that in the medium term two opposite factors emerge, on the one hand, the slowdown in the euro zone, which will “undoubtedly” mean a sharp fall in CO2 emissions and in the demand for emission rights in the electricity sector, the electro-intensive industry, and aviation and, on the other, by the automatic mechanisms available to the market to reduce the supply of emission rights as emissions fall.

The price of CO2 has fallen by 25 percent since the beginning of the pandemic to 2018 values.

“This should act as a support for the price. The market is designed to revert to high prices as soon as the pandemic is overcome,” he said.

Precisely, the EU market has gone from 15 to 18 euros in recent days, although now it depends on how the market evolves in the second quarter depending on how the first global shock caused by the pandemic is resolved.

Source: Europe Press