European Union carbon permits for December advanced to a seven-week high as demand climbed in auctions of allowances this week.
The benchmark futures contract jumped as much as 5.75 percent to 4.23 euros ($5.59) a metric ton on the ICE Futures Europe exchange in London. That’s the highest since April 16, when the EU Parliament rejected a proposal to help curb a surplus of allowances. EU permits have gained 67 percent since the record-low 2.46 euros on April 17, and closed at 4.12 euros.
Germany sold 4 million carbon permits today after getting bids for 3.8 times that amount, 35 percent higher than the average in auctions since October, according to data from the European Energy Exchange AG in Leipzig, Germany. Demand may be fueled by utilities hedging increased sales of future power output, according to Mark Owen-Lloyd, trading director at Clean Energy Group Ltd.
“The key thing is the auctions are clearing very well, and the utilities are hedging all their power forward,” said London-based Owen-LLoyd. Carbon allowances are “also in a strong uptrend from the post-vote low, so speculative traders will keep buying dips,” he said.
Power producers from Germany’s EON SE to CEZ AS of the Czech Republic are selling more future production than at any time in the past five years as the longest slump in electricity prices shows no sign of ending, data from five utilities compiled by Bloomberg Industries show. Utilities buy carbon permits to cover emissions generated from power output.
Prices have climbed as lawmakers and nations consider a change to the region’s emissions-trading law to enable temporary curbs on the supply of carbon permits. The EU Parliament’s environment committee is scheduled to recommend next steps on the draft measure on June 19 before the whole assembly holds a second vote on it on July 2.
United Nations Certified Emission Reduction credits closed 5 percent higher at 42 euro cents a ton on ICE. The contract has climbed from a record 20 cents in April.
Emitters can use about 1.64 billion tons of UN carbon credits to meet EU emissions caps in the 13 years through 2020, according to Bloomberg New Energy Finance estimate published yesterday.
The prediction is based on the European Commission’s proposal published June 5 on limits for offset use. The regulator has said use of offsets in the period will be “some 1.7 billion tons,” according to its website.
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