EU Carbon Permits (EUAs) have hit an eight-month high at around approximately €88.09 per metric tonne.

The Carbon Border Adjustment Mechanism (CBAM), and the EU Emissions Trading System (ETS), where designed to protect the environment. There is a cap, reduced annually, that limits the total greenhouse gases that businesses can release. Companies must have an allowance for every tonne of carbon dioxide they release, but companies can buy permits at auctions or from other businesses. As such it is generally EU energy and industrial firms that require the largest volumes. The price of certificates mirrors the weekly average auction price of EU ETS allowances.

The spike in European natural gas prices, mainly created from the instability in the Middle East, has created a resurgence in potential coal use, as reported here, and as coal is highly carbon-intensive, there has been a rush to buy up carbon permits. And a high demand always means a higher cost.

The price is widely expected to increase further, even though the entire system has come under review.

The new price high comes as the EC has recently unveiled major structural changes to the EU ETS, again in part of geopolitical instability and perceived lack of competitiveness. The EU wants to arrest the annual emissions cap reductions and extend free carbon allowances.

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