At the beginning of this year, I predicted that we would see the price of carbon continue to rise, and in particular the price of EU carbon permits. Well the year is still young but so far the opposite has been happening. Back in January, the price of EU carbon permits were hovering around €80 per tonne. Since Russia bullied its way into Ukraine at the end of February, this market has corrected and now hovers around €66 per tonne. Generally carbon prices tend to increase alongside energy prices, but the opposite dynamic is happening right now because of all of this geopolitical uncertainty. But over the long-term, I don’t believe that this will remain true. So this feels like possible mispricing to me. Climate change may be a relatively less important issue in Europe right now, but it’s not going away.
Chart: Trading Economics