The price of allowances in the European Union carbon market reached 100 euros per tonne for the first time, a milestone that reflects the rising costs that factories and power plants have to pay when they pollute.

EUAs are the main currency in the European Union’s Emissions Trading Scheme (ETS), which obliges manufacturers, power companies and airlines to pay for every tonne of carbon dioxide they emit as part of the bloc’s efforts to meet its climate targets.

EU countries and lawmakers agreed to reforms of the EU carbon market late last year, creating a bullish mood that has been accentuated in recent weeks.

Traders also noted that expectations of colder weather and low wind speeds boosted demand for permits from fossil fuel power generators in recent days, and speculator buying also boosted prices.

The price rise also follows a surge in demand for CO2 permits from the power sector in 2022, when declining Russian gas supplies helped drive a 7% increase in EU electricity generation from coal, the most CO2-intensive fossil fuel, despite the high price of CO2.

The shift back to coal has raised fears for Europe’s climate targets, although EU policymakers say this is a short-term response, and that the high price of fossil fuels will ultimately accelerate the shift to renewables.