Prices in the world’s biggest carbon market are soaring
Investors are paying attention; many see it as a one-way bet
AS FINANCIAL MARKETS become cheerier about the pace of vaccinations and the chances of a speedy economic recovery, the prices of stocks, commodities and all sorts of assets are rising. So too are carbon prices in Europe, home to the world’s largest emissions-trading system. Prices have surged by 60% since November; on February 12th they hit a record high of nearly €40 ($49) per tonne of carbon-dioxide equivalent (see chart).
Last year the value of global carbon markets hit a record €229bn, a five-fold increase from 2017. The EU’s emissions-trading system (ETS) accounts for nearly nine-tenths of both that value and that growth (China’s is just starting up; see article). In 2020 around €1bn-worth of emissions allowances changed hands a day, as well as lots of options and futures contracts. There are now clear signs that the market is joining the financial mainstream, with hundreds of investment firms trading in it.
This article appeared in the Finance & economics section of the print edition under the headline "Coming into its own"
Finance & economics February 27th 2021
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