Frances Macron says EU carbon price of Eur25-30/mt needed to be effective

29 September 2017 | Markets

French President Emmanuel Macron has reiterated his call for a European carbon price of Eur25-30/mt and for the first time since becoming President in May laid out his vision on the energy transition and the possible shape of EU carbon pricing.

According to his speech on European reform at the Sorbonne university in Paris, Macron links EU carbon prices to a possible CO2 tax at European borders, saying this would increase investment for cross-border interconnectors needed for an efficient European energy market.

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Germany's Greens are calling for a quicker exit from coal in Germany by introducing higher CO2 prices, while the business-friendly FDP and parts of Merkel's CDU/CSU conservatives are likely to reject such measures saying it would hurt German industry's competitiveness.

However, FDP leader Christian Lindner and Greens co-chief Cem Ozdemir, despite clashing on energy issues, are seen as possibly achieving agreement on climate policy with the FDP's rejection of President Macron's financial plans for a common eurozone budget a bigger stumbling block for the so-called 'Jamaica' coalition in Berlin.

The introduction of a CO2 minimum price across Europe as called for by French President Macron would have a negative impact on Germany's export-oriented industry, but would make it easier for Germany to achieve its climate targets as gas-fired power plants would move ahead of coal in the merit order, German power experts said in June.

According to expert calculations, a so-called carbon floor price at Eur30/mt as called for by Macron in his election campaign would lift German wholesale power prices by Eur15/MWh to levels around Eur50/MWh.


Macron in his two-hour-long Sorbonne speech also laid out more of his vision for the "ecological transition" which he says depends on a "fair and significant price for carbon, high enough to ensure this transition."

Macron also called for faster implementation of interconnectors, saying projects were slowed down due to national interest in the past, using Spain and Portugal as an example.

Macron described nuclear energy as "indispensable at certain times," with low-carbon energy needing to be pooled within Europe.

"To succeed in this strategy, we must also ensure that our industries most exposed to globalization are on an equal footing with competing industries from other parts of the world who do not have the same environmental requirements," Macron said.

"That is why we need a tax on Europe's borders on carbon, which is indispensable. Floor price, interconnections, 'territory transition contracts' and carbon border tax, these are the four pillars of this energy ambition for Europe," the French President added.

Both Macron and Merkel have already joined forces in global climate policy at the recent G7 and G20 summits following the US' exit from the Paris agreement, with French and German ministers in early September calling for joined action at the COP23 meeting in Bonn in November, the follow-up to the 2015 Paris climate accord, as well as continued reform of the European emissions trading scheme with key talks for the next phase beyond 2020 planned for October.

With Germany's next coalition unlikely to be in place before that, the current government remains as caretaker government with key positions in both the environment and energy ministries held by civil servants close to the Green Party.

Germany remains Europe's biggest emitter of greenhouse gases due to its 40% dependency on coal in its power mix, while France would like to reduce the share of nuclear from currently over 75% with the eurozone's two biggest economies struggling to maintain energy-intensive manufacturing jobs.

EUA carbon allowances have risen to a two-year high above Eur7/mt amid strong volatility and record trading volumes on the ICE exchange with traders showing particularly strong interest in the back end of the forward curve, according to sources.



Source: Platts