Bloomberg News

EU Carbon Permits Fall Most in Three Weeks on Expanded Surplus

May 15, 2014

European Union carbon permits fell the most in almost three weeks in London after the market regulator said yesterday a surplus of the emission allowances expanded last year.

Permits for December dropped 6.8 percent, the most since April 25, to 4.81 euros ($6.60) a metric ton at 4:40 p.m. in London on the ICE Futures Europe exchange. The contract slid as much as 8.5 percent earlier today. The allowances dropped for a third consecutive year in 2013.

The glut swelled to more than 2.1 billion tons by the end of 2013 from almost 2 billion tons a year earlier, the European Commission, the EU’s executive arm, said yesterday. That exceeds the 1.9 billion tons emitted in all of 2013 by factories and power stations covered by the market, according to EU data published today.

“There’s going to be more downward pressure on the market,” as the surplus is sold or given away, said Trevor Sikorski, an analyst in London at Energy Aspects Ltd. Sales of allowances by traders to close out bets on gains probably worsened today’s decline, he said by phone.

Falling natural gas prices are enticing some utilities to switch to the cleaner-burning fuel from coal, cutting demand for carbon permits, Sikorski said. The within-day U.K. natural gas contract dropped as much as 2.6 percent today and is down 32 percent this year, broker data compiled by Bloomberg show.

“You’re getting more gas in the mix, especially in the U.K.,” Sikorski said.

The EU’s 28 member states are divided three ways on fixing 2030 climate and energy rules, Greek Environment Minister Yiannis Maniatis said yesterday. Some countries approve the commission’s Jan. 22 proposal to reduce emissions by 40 percent from 1990 levels, others have reservations about that plan and a third group wants more ambitious policies, he said.

Trading in the December contract jumped 43 percent today to 32.6 million tons, the highest for almost three weeks. Volume of call options cleared on ICE jumped to 2.9 million tons, also the highest since April 25, from 1 million tons yesterday.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Claudia Carpenter, Dan Weeks


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