(Bloomberg) -- The cost of polluting in the European Union jumped to a fresh record, with utilities looking to burn more coal just as the supply of permits dries up.
Carbon futures rose for a fourth day, the longest winning streak in almost a month, as high natural gas prices incentivize utilities to use dirtier coal to produce power, which has become more profitable than gas to produce power. That requires companies to consume more permits -- not long after a key carbon auction was canceled earlier this week.
Europe is grappling with an energy crunch as supplies are struggling to keep pace with rising demand. Russia is keeping gas flows low just as tensions with Ukraine are running high, fueling concerns shipments from Europe's top supplier could be disrupted.
“Lack of supply at these record-high prices could cause continuation of a prevailing trend,” Jan Kresnik, a carbon trader at Belektron, wrote in a report. “There may be less probability for major correction in the current market environment.”
Hedge Funds See No End to Carbon Rally After Last Year's Surge
Carbon rose as much as 0.8% to 94.94 euros a ton, later paring gains to trade little changed at 8:22 a.m. London time. Prices are fast approaching the 100-euro mark, a level many hedge funds and analysts expected would be reached last year.
A technical glitch on Tuesday led to the cancellation of the daily auction on the European Energy Exchange AG, helping to push prices higher. More thinly-traded U.K. allowances also reached a fresh record on Wednesday, closing at 85.78 pounds per ton.
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