Why the EU’s rising carbon prices are important for net zero ambitions – The National

Why the EU’s rising carbon prices are important for net zero ambitions – The National

Headlines about rising prices are everywhere at the moment – for food, fuel, metals, medicine, computer chips and much more. One of the most significant rises is for the least tangible commodity – European carbon emissions credits. Its record highs have profound implications for the world economy and environment.

The European Trading Scheme began in 2005, and obliges large greenhouse gas emitters, such as power plants, factories and airlines, to hold an allowance for each tonne of carbon dioxide they release. The UK introduced an equivalent system when it left the EU.

It is intended to penalise polluters and encourage them to shift to lower-carbon technologies, for instance by replacing a coal power plant with solar and wind, or an oil boiler with gas or electric heating. The number of allowances is limited and decreases each year, so if companies are too slow in decarbonising, the price will rise.