European Union carbon allowance prices are probably capped at about 3.50 euros a metric ton as traders await the bloc’s next plan to reduce a surplus of the permits, according to Mercuria Energy Trading SA.
Carbon for December has plunged 37 percent since the European Parliament voted on April 16 against a proposal to temporarily withhold the sale of new permits. The 27 EU governments made no progress in talks yesterday on a rescue for the 54 billion-euro ($71 billion) greenhouse-gas market.
“We’re going to be in a very low price environment, and just bounce around 2 or 3 euros from here,” Roger Jones, Mercuria’s global head of non-oil trading, said in an interview at the Financial Times Global Commodities Summit in Lausanne, Switzerland on April 16. “The market feels capped at 3.50 euros now. It’s going to range-trade until there’s a new announcement.”
The Geneva-based commodities trader will stay in emissions markets, even after prices fell more than 90 percent since their high of 31 euros a ton in April 2006. They dropped 2.3 percent today to 3 euros on the ICE Futures Europe exchange at 11:32 a.m. in London.
“We’ve had a carbon presence for a long time and we certainly will continue to be involved,” Jones said. “We have no plans to either grow or exit.”
European parliamentarians rejected the European Commission’s proposal to change the bloc’s emissions-trading law. The measure would have enabled the commission to ease the oversupply by withholding allowances covering 900 million tons of emissions through 2015 and reintroducing them at the end of decade.
Additional permits being sold by the European Investment Bank and Poland may help drive prices lower, Jones said.
“We hope for the market not to be changed too radically, too often,” he said. “That makes it untradeable for participants and will affect liquidity.”
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