European Union carbon permits rose to a three-week high before a vote next week on a change to the bloc’s emissions trading law that would allow a temporary reduction in supply.
EU allowances for delivery in December rose as much as 15 percent to 5.26 euros a metric ton and closed at 5.23 euros on London’s ICE Futures Europe exchange. That’s the highest since Jan. 23. The contract extended this month’s gain to 53 percent.
ICE Futures Europe handled a record 44 million tons of December carbon futures today. That’s the third-highest daily volume for any front-year contract, according to ICE Futures data on Bloomberg.
The EU rescue plan for the carbon market is increasingly likely to win majority support from the European Parliament’s environment committee in a vote on Feb. 19, Matthias Groote, the lawmaker in charge of the measure in the assembly, said in an interview last week. The proposal will also need approval by the whole Parliament and member states in the next stages of the legislative process.
Groote’s comments “triggered more optimism in the market,” Paolo Coghe, a senior European power, coal and carbon analyst at Societe Generale SA, said by phone from Paris today. “It’s being reflected both in spot prices and in auction results.”
The U.K. sold 4.1 million permits at 4.57 euros a ton at auction on ICE Futures, 2 euro cents higher than the midpoint of bids and offers for spot Phase 3 permits at 10 a.m., when the sale ended, ICE data show. Five of the last six auctions have cleared at prices above the prevailing spot rate, according to data compiled by Bloomberg.
“The uncertainty is easing a bit but we should remember that there’s a significant element of speculation here as well,” Coghe said.
Front-year futures prices have risen in four of the last five sessions, which may reflect demand before the vote in the EU assembly’s panel, according to Milan Hudak, an analyst at Virtuse Energy s.r.o. in Prague.
“Traders may be accumulating permits in the expectation that the committee will approve the plan, which would be bullish for carbon,” Hudak said today by e-mail.
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