Bloomberg News

EU Carbon Advances After Panel Approves Plan to Fix Oversupply

February 20, 2013

European Union carbon permits gained as much as 6.8 percent after a panel of lawmakers yesterday approved plans to tackle an oversupply of allowances.

December futures closed up 6.4 percent at 4.98 euros ($6.65) a metric ton on London’s ICE Futures Europe exchange. They earlier rose as high as 5 euros. Trading volume in the benchmark contract dropped 57 percent to 24 million tons from yesterday’s record 56 million tons.

The European Parliament’s environment committee yesterday approved a proposal to amend the bloc’s emissions-trading law to explicitly allow the regulator to alter the schedule of permit auctions. The EU market may have had a surplus of as much as 1.6 billion tons, or 80 percent of one year’s supply, at the end of 2012, Kathrin Goretzki, an analyst at UniCredit SpA in Munich, said in a Jan. 29 report.

Trade in spot Phase 2 permits, whose eligibility ends April 30, dropped 84 percent to 1.2 million tons from yesterday’s three-year high of 7.2 million tons. The EU will exchange remaining Phase 2 permits for Phase 3 allowances some time after the end April.

“Companies may be selling spot permits and buying futures to avoid the bureaucracy associated with the shift from Phase 2 to Phase 3,” Jan Fousek, head of trading at Virtuse Energy sro in Prague, said by e-mail today. They may also be selling spot permits to generate cash rather than borrow at commercial interest rates, he said.

United Nations Certified Emission Reductions for December slipped 2 euro cents, or 5.7 percent, to close at 33 cents a ton.

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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