The price of CO2 emissions in the EU-28 has increased eightfold in the last five years

40 Euro / t CO2 is the historical maximum recorded in February 2021. Data analysis from UABIO expert Oleksiy Epik.

What does the price of CO2 emissions mean?

This is the price of European Union Allowance (EUA) – a unit of emission reduction that is equivalent to 1 ton of CO2-eq. within the European Emissions Trading System (EU ETS). This system currently covers up to 80% of all greenhouse gas emissions in the EU-28 and is one of the two current CO2 monetization tools in the EU-28. The second mechanism is a carbon/energy tax, the level of which for different EU-28 countries ranges from 1 Euro / t CO2 (Poland) to 100 Euro / t CO2 (Sweden).

Forecasts for future growth

According to the latest forecasts of the EU Science Hub – Joint Research Centre Center, the most authoritative research group that provides scientific support to the governing bodies of the EU-28 for policy-making, the price of the EUA in 2050 will rise to 120 Euro / t CO2.

This will be accompanied by a simultaneous reduction in greenhouse gas emissions in the EU – more than three times from 2008 level. A similar forecast for prices and emission reductions is given by the Energy Community, to which Ukraine is a Party.

It will be recalled that Ukraine currently has one of the tools for CO2 monetization – a carbon tax at the level of 0.3 Euro / t CO2, which is 130 times lower than the current price of CO2 in the European market.

This mechanism needs serious refinement: for example, the carbon tax in Ukraine is paid by plants that do not emit but reduce CO2 emissions – biomass and biogas (more on this at the link).

Regarding another mechanism for CO2 monetization – the Ukrainian Emissions Trading System (UA ETS) – from January 1, 2021, it has been introduced for large installations in terms of monitoring, reporting, and verification of greenhouse gas emissions. Elements of the trading system, such as the price of 1 ton of CO2, the emission allocation plan, market mechanisms of trade between plants, the platform (exchange) for trading within the UA ETS are not yet defined.

Meanwhile, the EU is preparing to approve (in 2021-2022) another mechanism for CO2 monetization – the so-called Carbon Border Adjustment Mechanism.

Meanwhile, the EU is preparing to approve (in 2021-2022) one more mechanism for CO2 monetization – the Carbon Border Adjustment Mechanism.

What does it mean?

Introduction of an additional tax on “dirty” goods imported from countries where there is no or lower than the EU level of tax on CO2 or emission reduction prices within the trading system.

How will this affect Ukraine?

After the introduction of this mechanism, a significant difference in the price of CO2 between Ukraine and the EU-28 will lead to the fact that the Ukrainian industry will be forced to pay this tax in full. We will tell about it in more detail in the following materials of UABIO.