Emergence of big carbon markets

The value of carbon markets is reaching record highs as global climate actions gained unprecedented momentum. Carbon permits in the EU’s ETS reached a record high of 89 euro per metric ton in December, tripling the yearago levels and significantly outperforming equity indices. Reviving post- COVID economic activities, anticipation of the EU’s tightening climate policies, and more recently elevated natural gas prices have all fueled higher demand for EU carbon permits.

Similar dynamics are playing out in other regional schemes where prices for carbon permits in the California cap-and-trade market and the north- east’s Regional Greenhouse Gas Initiative (RGGI) were up 70% and 75% in 2021, respectively.

Such strong price actions across the world’s three most liquid carbon markets put a spotlight on carbon as a barometer for global climate policy actions and as an emerging asset class.