Bloomberg News

EU Carbon Auction Clears at Biggest Discount to Spot Price

November 16, 2012

Germany’s sale of spot European Union carbon permits for the third phase of the bloc’s carbon market cleared at the biggest discount to the spot market price since the sales began three weeks ago.

The country sold 3 million metric tons of permits valid for Phase 3 of the EU emissions-trading system, which starts in January, at a price of 6.75 euros ($8.59) a ton on the European Energy Exchange AG. That’s 25 cents less than the prevailing price for Phase 2 spot allowances, according to data from NYSE Euronext (NYX:US) and Caisse des Depots et des Consignations’ Bluenext SA spot exchange, and the biggest discount to the spot price since Phase 3 sales started on Oct. 26.

The European Commission, the market’s regulator, proposed this week to withhold 900 million permits from the market starting next year, to fix a surplus of permits that drove prices for December to a record-low 5.99 euros on April 4. It is also selling as many as 120 million Phase 3 permits before that period begins, after utilities sought early auctions of carbon allowances to match their forward sales of electricity.

The EU sold 4.03 million Phase 3 permits yesterday at a discount of 8 cents to the prevailing spot market price. Bidding volume in yesterday’s sale was the lowest yet, as buyers sought a total of 4.9 million tons compared to the total of 4.03 million tons for sale.

EU regulations governing carbon auctions allow the seller to cancel the sale if the clearing price is deemed to be “significantly under” the prevailing market price. EEX didn’t immediately reply to e-mailed questions seeking more details of the cancellation criteria.

To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net

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


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