Spanish authorities have warned that an unprecedented jump in natural gas and electricity prices in the EU has threatened to save the planet by making it difficult to achieve carbon neutrality by 2050, Bloomberg reports.
The Spanish government has called on the European Commission to develop procedures that would allow states to respond quickly to price hikes and take action to prevent financial speculation in carbon trading. The EU should create a single platform for buying natural gas, according to a Spanish document sent to Brussels. “This situation could reflect badly on [EU countries’] initiatives to reduce carbon emissions. Policies to reduce carbon dioxide emissions are generally understandable and accepted in Spain, but may not withstand a long period of excessively high electricity prices,” the document said. Energy prices in Europe are breaking records as countries recover from the pandemic crisis and their economies suffer from gas shortages amid restrictions on gas imports from Russia and Norway.
In addition, the EU plans to tighten its environmental policies within a decade, a decision that has spurred a flurry of activity in the carbon market. In the summer, the organization unveiled a plan under which it intends to cut harmful emissions in the bloc by 55 percent by 2030 (compared to 1990 levels) and reduce them to zero in 30 years. The EU wants to involve industry in achieving these goals through emissions trading under the EU ETS (European Union Emissions Trading System). This program imposes limits on the total amount of greenhouse gases that can be produced by all installations within the EU. The organization then sells permits to companies for a certain amount of emissions. After the disclosure of the EU environmental plan, investors were interested in the quotas, and by early September prices for them rose to a record level.
The EU ETS market has seen many outside investors, not related to the industry, who have invested in futures on carbon credits. Experts believe that speculators could drive the price of allowances even higher. “The EU ETS should be a market for energy and industrial companies. We are also of the opinion that EU ETS trading should not be accessible to any [outside] agents, especially speculators who can influence the market,” the Spanish government said.
In mid-September, gas prices were approaching a thousand dollars per thousand cubic meters. Against the backdrop of soaring fuel prices, the International Energy Agency called on Russia to increase supplies to Europe. Gas reserves in EU countries are shrinking as winter approaches, when states may face sudden cold spells and unplanned power cuts.