LONDON, Oct 17 (Reuters) - Analysts at Berenberg have sharply raised their price forecasts for European carbon permits in 2019 and 2020, expecting prices to more than double from current levels.
Europe’s benchmark carbon price has already more than doubled this year to around 19 euros a tonne, with utilities ramping up hedging ahead of supply cuts coming into effect from 2019 and as more speculative traders entered the market.
Analysts at investment bank Berenberg said they now forecast a carbon price of 45 euros a tonne in 2019 and 65 euros a tonne in 2020, up from 25 euros and 30 euros respectively.
“We now think we are in a market deficit this year,” Berenberg senior analyst Lawson Steele said at the Carbon Forward conference in London on Wednesday.
He said carbon prices would also need to rise to encourage more fuel switching from coal power generation to gas as the European Union seeks to reduce its carbon emissions.
“You need 45 euros a tonne (for carbon) for that (fuel switching) to happen,” Steele said. (Reporting By Susanna Twidale; Editing by Susan Fenton)