BRUSSELS: The European benchmark price for carbon allowances on Monday hit a record of above 71 euros ($79.79) per tonne, although concerns about new lockdowns to try to curb rising COVID infections in Europe could limit further gains.

The December 21 EUA contract touched a high of 71.21 euros per tonne, hitting a new record for a sixth consecutive business day.

It traded at 70.13 euros per tonne by 1453 GMT.

Colder weather and less wind power output this week left more room for fossil fuel generation, which could translate into higher demand for EUAs, Refinitiv analyst Ingvild Sorhus said in a morning comment.

“That said, with Europe being the epicentre of the COVID-19 pandemic, worries over more lockdown measures and lower activity could weigh on markets and also carbon,” she said, adding that the overall outlook remained bullish.

The carbon market has been boosted by agreement on global carbon trading at the U.N. Climate Summit earlier this month and surging gas prices, that lifted it above technical resistance levels, analysts said.

High gas prices make it more economic for power companies to burn coal for electricity, which emits twice the amount of carbon dioxide as using gas, requiring more carbon permits.

A report from European financial regulator ESMA last week, found no proof of anti-competitive behaviour in emissions trading.

Marcus Ferdinand, manager at Oslo-based consultancy Thema, told Reuters by e-mail the report boosted confidence in the market because no immediate intervention from policy makers was expected.

The market should remain structurally bullish, given profitable coal generation and interest from institutional investors, he said, but anticipated a short-term correction based on the likelihood of further COVID restrictions and the market appearing “overbought now from a technical perspective”.