Destabilizing speculation

Energy crisis jeopardizes Europe’s green overhaul, Spain warns


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(Bloomberg) – The European Union’s ambitious plan to achieve climate neutrality risks falling victim to the unprecedented surge in natural gas and electricity prices, Spain has warned.

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The Madrid government has called on the European Commission to design procedures that will allow member states to react immediately to price spikes and to adopt measures to prevent financial speculation in its carbon market. The bloc is expected to create a central platform to buy natural gas, thereby boosting its bargaining power, according to a Spanish document sent to Brussels.

“This situation may provoke a backlash against initiatives to reduce carbon emissions, as we have already seen in France with the yellow vests crisis,” the Spanish government said in the document, aimed at triggering a wider debate in Europe and seen by Bloomberg News. “Carbon reduction policies have been generally understood and accepted in Spain, but may not withstand an extended period of abusive electricity prices. “

Spain and the Commission have both confirmed the authenticity of the document.

Energy prices are hitting historic highs in the 27-country region, as bloc economies rebound from the Covid-19 pandemic. The increase in demand comes amid limited gas imports from Russia and Norway, raising concerns about inadequate storage levels. At the same time, an EU proposal to toughen climate policies this decade has boosted investor demand for emission permits.

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Europe wants to become the first climate neutral continent in the world as part of the Green Deal strategy, which has led to the adoption of a stricter carbon reduction target for 2030. As part of this, the The EU intends to impose faster emission reductions on companies in its Emissions Trading System, a plan that attracts financial investors into the program and has helped push carbon prices to an all-time high at the start of the month.

The number of outside investors in EU carbon futures has reached an all-time high, BloombergNEF said in a note today, adding that recent data suggests speculators may move the market, in particular. in the event of a lack of liquidity. The region’s cap-and-trade program places pollution limits on manufacturers, utilities and airlines.

“A bubble in the EU ETS is the last thing we need; The EU ETS should be a market for energy and industrial companies, ”Spain said in its document. “We also believe that trading in the EU ETS should not be accessible to all agents, especially strong speculators in the market.”

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