European carbon price could rise to €250/t by 2034 – analysts

This will lead to the gradual abandonment of the free allocation of EU ETS quotas and the reduction of the emission limit

The gradual abandonment of the free allocation of allowances under the EU ETS, together with a reduction in the emissions cap, could raise the European carbon price to €249/t by 2034. This forecast is made by the British consulting company Redshaw Advisors, Montel reports.

Starting in 2026, the free allocation of EU allowances will be gradually phased out, a process that will last until 2034 for sectors covered by the CBAM. This is likely to
push the EU’s reference carbon price from its current level of around €63/t to €98/t by 2026. By the end of the decade, it could reach €150/t, and by 2034 – €250/t.

According to Louis Redshaw, founder of Redshaw Advisors, at the SteelOrbis 2024 conference in Paris, more than 4,000 large companies, accounting for about 40% of EU emissions, are constantly making efforts to decarbonize, preparing for the reduction of free carbon allocation.

Dan Maleski, Senior Environmental Markets Consultant at Redshaw, noted that other factors, such as lowering the emissions cap, will play a bigger role in price pressure than the gradual phase-out of free allowances.

As of 2022, there were allowances for about 1.4 billion tons of emissions (1.4 billion EUA) in circulation.

As GMK Center reported earlier, in 2023, the 10 largest polluting countries increased their industrial emissions to a record 24.5 billion tons of CO2, up from 23.9 billion tons (+2.5% y/y) in 2022. The top three were China, the United States and India, which together accounted for more than 53% of all industrial emissions last year.