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EU CO2 price ‘significantly’ influenced by political backing, researchers find

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By illuminem briefings

· 2 min read

illuminem summarizes for you the essential news of the day. Read the full piece on Euractiv or enjoy below:

🗞️ Driving the news: New research reveals that the EU’s CO2 price is significantly influenced by the perceived credibility of political climate commitments
• The study, published in Nature, links the 2023 collapse of the EU’s CO2 price to a loss of confidence in political climate action

🔭 The context: The EU’s Emission Trading Scheme (ETS) saw a rally in CO2 prices in the early 2020s as companies trusted politicians' climate commitments
• Researchers liken this to the euro crisis, where credible commitments from the European Central Bank stabilized the currency

🌍 Why it matters for the planet: Political credibility is crucial for maintaining high carbon prices, which incentivize investments in clean technologies and drive progress toward climate neutrality
• Fluctuations in CO2 prices can impact the effectiveness of climate policies and emission reduction goals

⏭️ What's next: Decision-makers need to maintain and enhance the credibility of their climate commitments to ensure stable and high CO2 prices
• This requires consistent and transparent policy actions to instill confidence in the market

💬 One quote: “If trust in the EU’s climate targets weakens, carbon prices could drop.” – Joanna Sitarz, German Potsdam Institute for Climate Impact Research

📈 One stat: The EU’s carbon price peaked at €100 per tonne of CO2 in February 2023 before gradually declining

Click for more news covering the latest on carbon market

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