BRUSSELS, May 12 (Reuters) - The amount of permits in
circulation in Europe's carbon market increased last year, as
the COVID-19 pandemic caused emissions covered by the scheme to
drop, the European Commission said on Wednesday.
The carbon market had just shy of 1.579 billion permits in
circulation at the end of 2020, the Commission said in a
statement published after trading in the market closed for the
day. That is a 14% increase from the 1.385 billion permits in
circulation a year earlier.
The number refers to the amount of permits in the market
that have not yet been surrendered by companies obliged to buy
and submit permits to the EU to cover their emissions.
The increase in the surplus last year was in line with
analysts' expectations, as the pandemic-induced economic
slowdown meant companies emitted less and therefore surrendered
Extra supply also entered the market in 2020 from UK permit
auctions that had been delayed from 2019. Britain left the
carbon market at the end of 2020, as part of its EU exit.
Based on the surplus, 378.9 million permits will be withheld
from carbon market auctions from Sept. 1 2021 to Aug. 31 2022,
and placed in the market stability reserve, the Commission said.
The price of permits in the EU carbon market has soared to
record highs this year and on Wednesday climbed above 55 euros
per tonne for the first time in the market's 16-year history.
The price rally has been stoked by factors including tougher
EU climate targets, which are expected to limit the supply of
permits in the coming years, plus increased buying from
Despite this outlook, the market continues to hold a
significant surplus, caused partly by a build-up of permits
after the 2008-2009 financial crisis curbed emissions and, in
turn, demand for CO2 permits.
The market stability reserve (MSR) tackles oversupply in the
carbon market by removing permits if the surplus exceeds 833
million permits. If the surplus falls below 400 million, the MSR
releases permits back into the market.
(Reporting by Kate Abnett; editing by John Stonestreet and