The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

CO2 market brings windfall profits for generators

The EU’s emissions trading scheme and Kyoto’s clean development mechanism are succeeding in promoting renewable energy. But electricity utilities are turning out to be surprise beneficiaries. Peter Koh reports.

SINCE TRADING IN carbon dioxide emissions began to take off with the implementation of the European Union Greenhouse Gas Emissions Trading Scheme in January 2005, the price of an allowance to emit one tonne of CO2 has risen from €8 to about €27, hitting a peak of €29 in July 2005.

The emissions market, which sets a limit on the total amount of CO2 that industry can emit and which allows participants to trade emission permits, is already having a big impact on energy prices and consumption patterns, which could benefit renewable energy. The scheme appears to be working as intended, but is also having some unanticipated consequences, with surprising beneficiaries making what are effectively windfall profits from it.

Higher demand for coal and lower than normal reservoir levels in much of Europe, which means that less electricity can be produced from emission-free hydroelectric generation, has contributed to a steep rally in CO2 allowance prices since November. The price of an allowance to emit one tonne of CO2 rose from €19.75/tonne in November to more than €27/tonne in March.

At the same time as CO2 allowances have been appreciating, the gas-to-coal differential, the ‘clean-dark spread’, has narrowed in Europe because the price of gas has fallen and the price of coal has risen.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree