The energy crisis will cause an increase in prices for carbon emissions in the EU – analysts shutterstock

The energy crisis will cause an increase in prices for carbon emissions in the EU – analysts

Katerina Belousova

A decline in industrial production in Europe could reduce demand for permits

Analysts have forecast an increase in the average price of EU carbon permits for 2022-2024 as higher gas prices lead to more coal use.

Forecasts for 2024 rose 4.2% to €101.96 a tonne, but weaker industrial production could hold back demand, reports Reuters.

Coal has twice as much CO2 emissions as natural gas.

EU quotas are expected to average €88.36 ($90.29) per tonne in 2022 and €97.66 in 2023, up 3.7% and 3.6% respectively from April 2022 forecasts year.

The EU's Emissions Trading System (ETS) makes manufacturers, energy companies and airlines pay for every tonne of carbon dioxide they emit as part of Europe's efforts to meet climate targets.

European gas prices hit record highs in 2022 following russia's full-scale invasion of Ukraine. Because of this, burning coal has become more economical for some producers.

"Germany, France and some other major European economies have already announced that they will reopen previously mothballed coal plants, which will keep emissions high in the power sector," said ClearBlue analyst Atashi Bhattacharjee.

Russia has reduced the amount of gas it sends to Europe through the Nord Stream gas pipeline to just 20% of capacity.

According to analysts, this could lead to a decline in industrial production in Europe, which could reduce the demand of industrial companies for permits.

Earlier, EcoPolitic wrote that on August 9, the EU plan of reduction of gas consumption came into effect in the bloc by at least 15% to deal with the energy price crisis caused by Russia's war in Ukraine.

As EcoPolitic previously reported, Germany, Austria, France and the Netherlands have announced plans to increase coal generation if russia stops supplying gas, which will create 30 million tons of additional emissions CO2 in 2023.

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