US carbon markets remain robust while EU allowances prices fluctuate


US carbon markets remain robust while EU allowances prices fluctuate


European Union carbon allowances prices fluctuated during the last three weeks due to rising energy prices and political instability. U.S. carbon credits markets, on the other hand, have not yet been affected by the turbulence.

On March 9, the Regional Greenhouse Gas Initiative held the quarterly auction of allowances, resulting in a record-high clearing price of $13.50 per tonne of carbon dioxide. According to the RGGI, the auction brought in roughly US$294 million for the 11 states that participated in the Mid-Atlantic and Northeastern cap-and-trade market.

Western Climate Initiative, another cap-and trade program in the North America, held its quarterly auction in February, with the clearing price reaching an all-time high of US$29.15

Investors are rushing to purchase U.S. carbon credits in anticipation of more rigorous federal and state climate legislation, which might boost demand for allowances. Besides, investors’ interest as well as the credits prices were further encouraged, according to observers, by the completion of RGGI Model Rule in 2017.

The robust U.S. markets contrast with the turbulence in the EU markets. The EU carbon price fell from near record highs of 95.07 euros per tonne on February 23 to 58.3 euros on March 7 because of Russia's invasion of Ukraine in late February and the subsequent energy crisis. The EU carbon credits value have recently rebounded to late-fall levels, with the price closed at 77.43 euros on Tuesday.

The EU carbon allowance lost 39% of its value during the first week of Russia's offensive in neighboring Ukraine. Pollution became less expensive for businesses as a result of the sudden decline. According to economists at ING Groep NV, some investors are selling carbon credits to cover losses in other sectors, and they may also have expected that skyrocketing energy prices would reduce economic activity, as well as carbon emissions and carbon credits demand.

Despite the recent volatility in the EU carbon market, Brussels-based climate policy think group Sandbag stated that the European cap-and-trade market is estimated to earn more than 1 trillion euros over the next decade, more than the EU's whole pandemic recovery budget.

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