Carbon price in the EU hit a new all-time high on Friday as Russia announced further curbs on gas supplies to the continent.

As traders warn coal is becoming re-embedded in Europe’s energy mix amid tight gas supplies, the carbon price in the EU hit a new all-time high on Friday, as Emission Trading System (ETS) credits – bought by polluters to compensate for their carbon emissions – neared €100, surpassing the previous high of €98.49 reached earlier this year ahead of Russia’s invasion of Ukraine.  

The record high carbon price comes as surging natural gas prices increase the appeal of switching toward more carbon-intensive fuel for power generation, contrary to expectations that this would make low-emitting renewable energy sources more attractive.

carbon price

Image 1: Carbon price in the EU hit a new all-time high, surpassing the previous record recorded in February

The European Union is going back to coal for power generation to secure enough supply ahead of what many predict is going to be a difficult winter. 

On Monday, German utility Uniper SE announced it will start producing electricity at its Heyden 4 hard-coal-fired power plant from August 29 until April 30, 2023. Since mid-2021, Heyden 4 only served as a reserve power plant, while electricity production was halted completely.

The decision came after Russian giant energy corporation Gazprom announced further cuts in gas supplies to the continent, with a three-day halt of natural gas supplies to Europe expected next week.

Earlier this month, the head of the federal network agency Klaus Müller told the Financial Times that Germany must cut its gas use by a fifth as well as increase its reliance on imports of gas from other European countries if it wants to avoid a crippling shortage this winter.

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