Carbon trading was supposed to encourage companies to reduce their emissions. Yet for many years, the carbon price was trading well below €20 (£17) per tonne on the EU Emissions Trading System (ETS), which is by far the most established market for trading carbon in the world. Most agreed that this did not send any financial signals to carbon-intensive industries to invest in green technologies.
But since the onset of the pandemic in 2020, the carbon price has rocketed to close to €90, taking everyone by surprise, including EU climate policymakers. So why has this happened, what are the likely consequences – and what can we expect to happen to the price in the coming months?
