The surprising strength of carbon prices and their impact on the power market
Supply and demand – or not
At first glance it seems at best ironic, possibly even perverse, that carbon prices should have been so strong in recent months. After all, the COVID crisis has caused a collapse in industrial activity and power generation across Europe, reducing carbon emissions and, therefore, also the need for emitters to hold carbon allowances under the EU Emissions Trading System.
Ample supply and reduced demand hardly seem the sort of conditions to cause a surge in prices – so what has been going on?