In 2020, the European Union raised the price of emissions permits by 28%. Meanwhile, the benchmark price of carbon allowances under the EU’s Emissions Trading System (ETS) has risen by 45% since December to record highs of €45 ($54.17) per ton. As a result, utility companies are switching their power generation fuel from coal to gas. In Germany, power generated from hard coal fell 6% in 2020, while those from brown coal dropped 11%.
Higher carbon pricing makes operating coal plants more expensive and less profitable. Some generators have replaced coal with natural gas, which emits less CO2 when burnt. Utilities that are unable to switch to gas have to pass the higher cost on to the consumer by raising prices, hurting their competitiveness.
At the same time, global coal prices are increasing due to China’s economic recovery. In March, coal prices are about $10/ton higher than a year earlier. Analysts said that higher coal prices would prompt utilities to accelerate coal plant shutdowns.
