Signs of Life for the Carbon Market

Today’s post is short and sweet. Two charts caught my eye yesterday.

1. The price per ton for carbon in the EU eclipsed €100 for the first time.

   

2. Russia’s share of natural gas imports to the EU has fallen by 80% in 24 months.

These two milestones are related. The price of carbon begins to skyrocket at the same time Russia’s share of NG declines.

I suspect that’s because NG prices also rose during this timeframe as supply tightened due Russia being shut off from the majority of the market and the world came back online from COVID.

This rise in price led many countries in the EU to turn to coal for power generation and since power generation is the vast majority of Scope 1 emissions, companies needed to offset their footprint more aggressively.

The bad news: coal emits way more greenhouse gases. The good news: carbon markets seem to be working at least in part.

Companies could have easily done nothing, but it appears they are attempting to offset their footprints correctly for fear of regulatory backlash.

That’s welcome news for a carbon market that’s been battered with bad headlines to start the year.

That businesses reacted so that they would not fail to meet targets is a healthy sign for a new market because a market without repercussions for failure is not a market at all.