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Accelerating carbon prices anticipates EU reductions of carbon allowances

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World Coal,

Carbon prices in the EU emissions trading system (EU-ETS) are set to average €35 - 40/t over the next five years, accelerating the transition away from coal and lignite power plants in EU countries with latent gas capacity, finds a new report by Mark Lewis of Carbon Tracker published on Tuesday 21 August.

Carbon Tracker finds carbon prices on course to reach €25 by the end of 2018, €10 higher than forecast in April. This accelerated rally in carbon prices anticipates EU-wide reductions of carbon allowances 2019-2023 that will leave the power and aviation sectors with a ~1.4 billion t carbon allowance deficit.

In reaction, carbon prices are likely to rise to levels that trigger fuel-switching from coal to gas in Germany, Italy, Spain and the Netherlands, following in the footsteps of the UK.

New analysis of the efficiency of coal and gas capacity on a national level sheds light on where the transition could take place. At a carbon price of €40, the EU could achieve emission savings of approximately 400 million t of carbon 2019 - 2023 due to fuel-switching.

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