Bloomberg News

EU Carbon Rises to 4-Month High as Brent Oil Advances

July 03, 2012

European Union carbon allowances gained as oil and German-power prices strengthened and the bloc’s regulators considered a temporary supply cut.

EU carbon for December rose 2.3 percent to close at 8.34 euros ($10.51) a metric ton, the highest since March 8, on the ICE Futures Europe exchange in London.

German electricity for 2013 increased 1 percent to 48.85 euros a megawatt-hour, according to broker data compiled by Bloomberg. Higher prices can boost the incentive to sell electricity forward, increasing demand for CO2 permits.

Brent crude for July delivery increased 3.4 percent to $100.66 a barrel as traders bet that central banks in Europe and China may ease monetary policy to spur economic growth and on speculation sanctions against Iran will curb supply. Oil can impact carbon prices because it’s linked to economic output and to cleaner-burning natural gas in Europe.

EU carbon may trade in a range of 6 to 10 euros a ton in the three months through September as regulators consider the temporary supply cuts, Deutsche Bank AG forecast.

“We think the risk is to the upside, not least because in our view some member states that might ordinarily be presumed hostile to such an initiative will look at the revenue potential from auctioning EU allowances over 2013-2015 at higher prices and support it,” Mark Lewis, an analyst for the bank in Paris, said today in an e-mailed research note.

Should other departments within the EU commission in Brussels object to the climate unit’s supply plan, carbon prices may fall, Lewis said.

“The market has rallied over the last month in the expectation that a reasonably aggressive proposal will be forthcoming in the third quarter that can then be implemented by the end of the fourth quarter,” he said.

United Nations Certified Emission Reduction credits for December rose 2.2 percent to close at 4.15 euros.

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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