Bloomberg News

EU Carbon Rises to Two-Month High as Delays Cut Auction Supply

November 06, 2012

European Union carbon rose to its highest in two months as 2012 supply may be lower because some nations are not ready to sell in auctions.

The European Energy Exchange AG yesterday published an updated list of auctions that showed 12 of 25 EU member states will sell at least 4.48 million tons of permits in each of nine sales from Nov. 20 through Dec. 18. While that’s up 11 percent from the previous 4.03 million tons per sale, it excludes some nations including Poland. The list is updated weekly as more member states complete preparations.

The contract for December gained 1.1 percent to close at 8.35 euros ($10.70) a metric ton, the highest since Sept. 7 on London’s ICE Futures Europe exchange. United Nations Certified Emission Reduction credits rose 3.8 percent to 1.09 euros a ton.

“The short-term supply squeeze is probably supporting prices this week,” James Cooper, an analyst at Bloomberg New Energy Finance, said today by e-mail. With lower volumes in sales, power utilities still need to buy carbon permits when they sell electricity forward, which can push up demand on ICE and boost prices, he said.

“There is an increasing probability that further early auction volume gets pushed into 2013, which would mitigate the potentially bearish effect of rising supply as we approach 20 million tons per week by the end of November,” Cooper said.

The updated auction list of countries ready to sell allowances and the total volume of permits to be sold, added a total 3.9 million tons from the Netherlands to the volume to be sold starting Nov. 20.

Curbing Supply

EU nations will “almost certainly” sell at least 7.3 million tons of allowances in 2013 instead of 2012, curbing this year’s supply, according to New Energy Finance.

“The addition of the Netherlands now lifts the confirmed volume of early auctions to 48 million tons,” Cooper said yesterday by e-mail. “This means a maximum of 112.7 million tons of early auctions will occur in 2012.”

Poland wants to start next month auctions of its portion of the carbon permits and may continue the sales in early 2013.

The central European country will be able to begin selling allowances for the 2013-2020 stage after it signs an agreement with EEX, according to Magdalena Sikorska, spokeswoman for the Polish Environment Ministry. The procedure should be finalized and sales should start the beginning of December, she said.

“Sales may continue in 2013,” Sikorska said by e-mail today. “The auctioning schedule will have to be agreed with EEX, in line with EU rules.”

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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