Bloomberg News

EU Carbon Has Record Monthly Drop as Nations May Block Glut Fix

January 31, 2013

European Union carbon permits had their biggest ever monthly drop as nations in the bloc may object to a regulatory plan to temporarily cut the volume of supply sold at auctions through 2015.

Carbon permits for December declined 10 percent today to close at a record 3.42 euros ($4.65) a metric ton on the ICE Futures Europe exchange in London. The contract fell 49 percent this month, the biggest drop since it was first offered in April 2008. Certified Emission Reduction credits for December dropped 1 cent to 34 euro cents a ton and fell 13 percent for the month.

While the European Commission’s proposal to help emission prices rebound from all-time lows has more prospective supporters than opponents among the EU’s 27 governments, it still needs support from at least some of seven nations to win approval in a qualified-majority system, three EU officials with knowledge of the matter said. Votes are weighted by each country’s size.

Among the seven countries, Germany, Portugal, Hungary and Malta are undecided, while Greece, Cyprus and the Czech Republic have voiced concerns about the draft measure, said the officials, who asked not to be named, citing policy.

“It’s not that difficult to get a blocking minority” because two big nations voting against so-called backloading would probably be enough to reject the plan, Trevor Sikorski, analyst in London for Barclays Plc, said today by phone.

Opposition by the Czech Republic and Hungary, for instance, would be enough to block the plan, assuming Germany abstains and Poland stays against, Sikorski said.

Should Hungary and the Czechs support the plan, buying carbon permits would make more sense, he said.

The political signs in favor of backloading are not strong enough to overcome the impact of supply being sold almost daily into the market, Kathrin Goretzki, an analyst at UniCredit SpA (UCG) in Munich, said today by e-mail in response to questions.

“Germany is only expected to give a formal opinion in spring, and, together with other nations that remain undecided, this clearly represents a risk that lack of support might end up stopping the proposal,” she said.

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

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


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