NCPA - National Center for Policy Analysis


December 1, 2006

Carbon prices are set to surge and firms might pass this rise on to the wholesale market, says a report by Global Energy Decision.

The authors say European nations, including France, Germany, Benelux, Austria and Switzerland, will find it ever harder to meet emissions targets outlined in the Kyoto protocol anti-greenhouse gas treaty.  The carbon market is deemed a key tool under Kyoto to reduce emissions.

According to the authors:

  • Future carbon prices will be between 40 and 80 euros per metric ton -- more than double current levels.
  • However, it is unlikely "that costs will be permitted to be passed on to electricity consumers for long durations."


  • As the deadline looms to meet Kyoto's phase one targets, firms will try to buy additional carbon allowances.
  • But allowances expected to be provided on a national basis "will fall far short of meeting industry requirements alone," which will further push up carbon prices.
  • Utilities will need to make substantial purchases from the Kyoto mechanisms (carbon reduction schemes in developing countries, which allow firms to reduce their carbon emissions at the lowest possible price) to meet its targets.

Source: "Europeans face fuel ‘price surge,' " BBC News, November 28, 2006; based upon: "Countdown to Kyoto 2008-2012: The Carbon Challenge for Europe's Electric Power Sector," Global Energy Decision,

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