Carbon prices dropped to their lowest level in 14 months because traders were not convinced by the COP28 Summit agreement for meaningful climate action from governments.
The carbon futures market in London, which follows the EU’s emissions trading scheme, briefly dropped 4% to €66 per tonne.
The drop, from €71 to €71, was the largest since October 2022. This followed a week of declines when a draft agreement appeared that dropped references to phasing-out fossil fuels.
Nearly 200 countries agreed to a final agreement in Dubai on Wednesday, recognising the need for a transition from fossil fuels towards net zero global emissions by 2050.
The fall in prices was attributed to two factors: the “weak language” of the Dubai agreement and the failure to reach an agreement on plans to trade carbon among states.
Qin called the non-binding language of the United Arab Emirates’ deal, brokered this week, the “weakest [language]” in all. It asked countries to “contribute to the transition”.
The agreement fell short of the demands made by certain countries, including small island states, for a more aggressive deal to end oil production.
In recent months, carbon prices were under pressure due to a mild winter that left EU gas stocks high.
Other analysts said there were few links between the agreement and the EU carbon price. Roman Kramarchuk, head of future energy analytics at S&P Global Commodity Insights, said policy changes linked to COP28 They were “inherently long-term”. The ETS price is more affected by the amount of gas that the EU has been able store, the mild weather conditions and the weak economic growth.
Climate summit results were mixed. Some observers, outside the carbon markets, are torn about whether they should acknowledge the historic nature and importance of the deal negotiated by Sultan al-Jaber – the chief executive officer of UAE’s National Oil Company – who is the COP28 President. Others feel that the deal did not go as far as it could have.
Lili Fuhr is the director of the Center for International Environmental Law’s fossil economy programme. She said that the COP was in many ways a fossil-fuel COP. It was hosted by a petroleum state, led by an oil executive. But it really brought fossil fuels to the forefront of the discussion [for the very first time].