For the first time in 2022, wind and solar energy will be the main sources of electricity in the EU, according to a new study by the climate think group Ember. There is a chance for the carbon markets to capture the rising price of emissions as Europe continues its shift to renewable energy sources.
The two renewable energy sources together accounted for 22% of the electricity in the EU in 2022, surpassing gas produced from fossil fuels for the first time and retaining its lead over coal since 2019. Recent years have seen a considerable reduction in hydropower, while nuclear power had a steep decline in 2022 as a result of unexpected outages at most of France's nuclear power reactors for much of the year and the shutdown of German nuclear plants. The EU's reliance on solar and wind renewable energy will account for about 83% of the decline in nuclear and hydroelectricity in 2022.
Since 2010, emissions in the EU have decreased by 32%, and annually, emissions from the electricity sector have decreased by 22%. Despite the continuous energy crisis in Europe for much of the year as the EU turned away from Russian oil and natural gas, there was only a 7% increase in coal-generated power compared to 2021 levels due to the increase in renewable energy sources.
"European nations are now working to phase out gas in addition to their continued commitment to phase out coal. In 2023, the clean, electrified economy that Europe is rushing toward will be fully evident, according to David Jones, head of data insights at Ember and primary author of the study.
"Change is rapidly approaching, and everyone must be prepared for it."
With KEUA, Invest in the EU's Carbon Transition.
With the strengthening of the EU Emissions Trading System (ETS) through the REPowerEU and Fit for 55 initiatives, there is overwhelmingly positive policy support for emissions reduction in the EU. Future carbon pricing will have a more stable base thanks to governmental assistance for the emissions transition.
The rising cost of emissions from coal and fossil fuel sources presents a chance for consultants and investors wishing to capture the potential of the energy transition through carbon permits as renewables continue to expand in the EU. The actively managed KraneShares European Carbon Allowance ETF (KEUA) provides focused exposure to the EU carbon allowances market.
The IHS Markit Carbon EUA Index, which measures the most actively traded EUA futures contracts on the oldest and most liquid carbon allowances market, serves as the benchmark for the fund. Now, the market provides coverage for 27 EU member states as well as Norway, Iceland, and Liechtenstein, accounting for about 40% of all emissions from the EU. The expenditure ratio for KEUA is 0.78%.