EU ETS prices fall sharply on Ukraine invasion

Combination of factors has led to EU allowances losing a third of their value, but bullish factors remain on the horizon

Carbon prices in the EU’s Emissions Trading System (ETS) have lost a third of their value, falling from more than €98/t in early February to €55/t this week. The scheme sets a cap on the annual emissions that can be produced by the industrial and power sectors covering around 50pc of the region’s emissions. Units in these sectors must then buy or apply for allowances to cover their remaining emissions. Prices in the scheme initially slumped following a fall in demand after the 2008 financial crisis. As a result, the European Commission introduced a Market Stability Reserve (MSR), which absorbed surplus allowances so they could not be traded.   €98/t – All-time high for prices in the scheme