We have written extensively about carbon prices over the last two years and followers of our dedicated ESG and Climate service will know that our expectation is for all CO2 markets to see prices rise to levels that justify large investments to avoid CO2 production or sequester it. We see that price closer to $100 per ton than the $50 per ton that 45Q will rise to by 2026. The California price shown below has much more upside as credits demand rises. Many of the net-zero pledges made by manufacturers and energy producers today cannot be achieved without buying some sort of credit and we expect demand to rise relative to supply through the balance of the decade and possibly quite quickly.
Source: EIA – Today In Energy, April 2022
The European wind and solar push looks much better than other regions in the chart below, but it is partly the cause of the energy troubles that the region faces today. The region has relied on renewable to meet energy demand growth but has also closed power production facilities that are needed today. As other regions build out more wind and solar, they should think about redundancy and the variability of power sources and ensure that they do not make premature shutdown decisions.
Source: Ember, Financial Times, April 2022
