Bloomberg News

UN CO2 Will Drop Below 2 Euros in Perfect Storm, Barclays Says

August 03, 2012

United Nations emission credits would probably drop below 2 euros ($2.45) a metric ton, an all-time low, assuming a simultaneous jump in supply of offsets and auctions of phase-three European permits, said Barclays Plc.

There’s a chance of a “perfect storm” in the carbon markets because European Union regulators decided on July 13 last year to sell 120 million tons of phase-three spot allowances by the end of this year to meet demand from utilities, which sell their power two to three years in advance, Trevor Sikorski, an analyst in London with Barclays, said today by phone. There’s another 30 million tons of aviation allowances being sold, according to the EU website.

Certified Emission Reduction credits would fall “certainly below 2 euros” a ton should those sales coincide with a boost in supply of Russian and Ukrainian credits and offsets from projects that cut hydrofluorocarbon-23, which have been under review the past two months by UN regulators, he said.

The Clean Development Mechanism executive board, the Bonn, Germany-based regulator of the UN market, will examine supply requests for 5 million tons of hydrofluorocarbon-23 emission credits by the middle of next week, potentially adding to a glut, Richard Chatterton, an analyst for Bloomberg New Energy Finance in London, said July 30. The EU market is oversupplied by 14 percent in the five years through 2012, including UN offsets, according to a New Energy forecast.

Tightening Plan

Connie Hedegaard, EU commissioner for climate action, said last week she was confident a plan to tighten the region’s carbon market would gain support from member states and the parliament this year. That so-called backloading of supply could see the temporary removal of 900 million tons of permits in the three years through 2015, according to a commission staff working document.

Should CERs drop below 2 euros before a decision is reached on backloading, EU allowances may test their record low of 5.99 euros a ton reached April 4, Sikorski said. UN offsets may not fall as far as 1 euro a ton, he said.

“That feels like a long way to go.”

CERs for December this year rose 2.1 percent to 2.96 euros a ton on the ICE Futures Europe exchange in London as of 1:50 p.m. They reached a record low 2.60 euros on July 30.

European Union carbon allowances for December advanced 1 percent to 7.15 euros a ton.

To contact the reporter on this story: 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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