Emission allowance price closes above EUR 70 for first time on plans by new German government

The price of a single emission allowance rose to a record EUR 73 during yesterday’s trading. The main reason for the price increase was the publication of the German government’s plans to introduce a minimum allowance price of EUR 60/t and other climate and energy targets.

Emission allowances, like other energy commodities, have seen sustained growth this year. While at the beginning of the year a single emission allowance could be bought for just over EUR 30/t, its price on the benchmark December contract is currently around EUR 73/t.

Yesterday was also the first day on which the allowance price closed above EUR 70.

Yesterday’s more than 5% price increase was primarily driven by the presentation of the new German government’s climate and energy plans. The key news for the allowance market was that the incoming government had agreed to introduce a minimum allowance price of EUR 60/t.

Reportedly, the only reason the German government would abandon the plan is if the European Union as a whole took the same step. German industry and the energy sector in general can therefore apparently say goodbye to lower allowance prices.

The introduction of a minimum emission allowance price has been discussed at EU level for some time. However, it has always remained only at the planning stage, with plans that were never implemented.

Germany’s plan to introduce a minimum emission allowance price is therefore likely to be an important signal for its introduction across the entire EU-27, as Germany is the EU’s largest CO2 emitter.

Another reason is Germany’s intention to extend emissions trading to other areas – the expansion is set to cover district heating (district heating areas that have so far been exempt) and transport. Similar steps have already been proposed by the European Commission in its draft new legislative package called the "Fit for 55 Package".