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Modelling market fundamentals and price dynamics

This second report of a three-part mini-series establishes a framework for assessing the outlook for the EU carbon price. It sets out our approach for modelling the fundamental price of an EU carbon permit over the rest of this decade.

In short, given our view that the demand for carbon permits will fall more slowly than supply over the rest of this decade, the market fundamentals are consistent with the EU carbon price rising to a record-high of over €140 per permit by 2030.

In view of the wider interest, this Climate Economics Focus has also been made available to clients of our Commodities Overview and Energy services.

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