On 21 February 2023, Europe's carbon price reached a new high of €100 ($106) a tonne, setting a new historical benchmark that strengthens the economic case for some green technology while imposing the highest bill for carbon dioxide (CO2) emissions on businesses.
This action is part of the European Union's (EU) efforts to accomplish its environmental goals of lowering emissions and transitioning to clean energy.
What is the EU carbon price?
The EU carbon price means that businesses in the EU pay a price for their carbon emissions. The European Union Emissions Trading System (EU ETS) aims to charge businesses for their carbon emissions.
Through EU ETS, emissions from about 10,000 organisations are to be reduced. The businesses that own or operate these installations purchase or obtain emissions permits, which they can exchange with other businesses. The limit on the total number of available allowances guarantees that they have a good value and limits emissions in absolute terms, which is the amount of carbon released into the atmosphere over a certain time period.
Which sectors does the EU carbon price affect?
The EU carbon price covers the production of electricity as well as a few energy-intensive industries, including steel mills, oil refineries, and the manufacture of metals and other commodities.
The power generation industry is the most impacted. The cost of fossil-fuel-based energy has increased as carbon prices have risen. It also increases the cost-effectiveness of green energy sources like wind and solar, which should stimulate a shift in supplier and customer behaviour.
The history of EU carbon price
With marketable carbon credits, enterprises are authorised to emit CO2 under the EU ETS, which was established in 2005 to limit the amount of carbon emissions and allow market forces to determine carbon prices through the exchange of emissions permits between businesses. According to the European Commission, regulated entities purchase or receive emissions allowances, which they can trade with one another as necessary. Regulated entities are required to acquire enough credits each year to cover all of their emissions.
What is the future of EU carbon price?
By 2030, the cost of carbon offsets might be as high as €210.66 per tonne. This projection is based exclusively on offset credits from eliminated emissions, which are in short supply.
Find out the carbon price today
The EU ETS suggests raising the EU's commitment to reduce carbon emissions by 55%, according to the 2030 Climate Target Plan.
The plan's goals are to:
- create a more ambitious and economical approach to attaining climate neutrality by 2050;
- increase the number of green employment created, maintaining the EU's record of reducing carbon emissions while expanding its economy; and
- urge international partners to focus on nature and raise their goal of lowering the global temperature increase to 1.5°C.
What are the benefits of the high carbon price?
Several organisations, nations, and businesses sell carbon credits and benefit from the high price of such credits, such as DGB Group. By using funds from selling credits, they invest in sustainable projects generating such credits, strengthening the carbon economy.
Carbon pricing efficiently transfers financial responsibility from the general population to those who emit carbon emissions.
The high carbon price will boost the economy and generate new jobs. More employment is generated by the switch to clean energy than by the use of fossil fuels. These positions in the clean energy sector also typically pay more than their counterparts in the fossil fuel industry and offer more perks. A carbon dividend policy boosts employment across the board, not only in the renewable energy sector.
The planet could reach net-zero energy with fair carbon costs. By funding initiatives like equal carbon dividends for everyone, money raised from the carbon price helps keep energy costs down.
What does the EU carbon price rise mean for companies?
Corporations subject to the EU ETS will be required to calculate the carbon footprint of imported materials to submit to the Carbon Border Adjustment Mechanism (CBAM).
Supply chain sustainability and carbon management software can assist businesses in better understanding their supply-chain emissions. Given the volatility of carbon pricing, enterprises will benefit from adopting an internal carbon price in line with regulated rates.
How does the EU carbon price rise affect DGB Group?
DGB aims to preserve, manage, and restore natural ecosystems through its large-scale nature-based projects. As carbon prices rise, DGB can increase its project investments to scale projects that reduce carbon emissions, restore nature, and help businesses reach net zero.
DGB develops impactful carbon projects that offer meaningful value to all participants, including businesses, local communities, and governments.
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