Nov. 30 (Bloomberg) — European Union carbon permits
dropped to a record after nations delayed a vote on a plan to
temporarily cut the supply of allowances.
EU allowances for December plunged 5.8 percent to the
lowest closing price since the contract was first listed in
April 2005 on the ICE Futures Europe exchange in London. The EU
commission, the bloc’s regulator, said yesterday member states
would not vote next month on the plan to cut supply in the three
years through 2015. They may not vote until June, according to
Bloomberg New Energy Finance.
The European Commission called for nations in the bloc to
reveal their positions on the proposal, which would reduce
supply by 900 million tons, the equivalent of almost half a
year’s full supply. Still, a Dec. 13 Climate Change Committee
meeting of national representatives won’t ask countries to adopt
a formal opinion or vote, the commission said.
“The low price levels are a sell off in the face of deep
disappointment from within the market at the European
Commission’s failure to deal quickly and decisively with the
surplus issue,” said Daniel Rossetto, managing director of
Climate Mundial Ltd., a London-based consulting company that
works in carbon markets. “The market will need to hang out for
quite a while longer before it gets the bullish news it’s
looking for,” he said today in an e-mailed response to
questions.
The emissions-trading system is the backbone of the bloc’s
climate policy and “is here to stay,” Isaac Valero-Ladron, a
spokesman for EU climate commissioner Connie Hedegaard, said
today in Brussels.
Commission Plan
Permits dropped 38 cents to close at 6.20 euros ($8.07) a
metric ton. They earlier today traded as low as 5.89 euros, an
all-time low intraday level. The monthly decline was 25 percent,
the biggest since January 2009. Certified Emission Reduction
credits for December declined 1 cent to 67 euro cents.
Poland has criticized the commission’s plan while Germany’s
economy and environment ministers were last week at odds over
whether to back it.
The complexity of EU lawmaking adds to the scientific and
geopolitical uncertainties in the carbon market, making it
increasingly unattractive, Jan Pravda, director of Prague-based
Pravda Capital Trading, said today in an e-mailed response to
questions.
The bloc plans to auction about 20 million tons of
allowances a week starting next year, after giving 97 percent
away for free in the five years through 2012, the second phase
of the system, according to the program’s rules.
June Vote
The postponement “is likely to mean that the Climate
Change Committee will only vote on the supply delay around June
next year, pushing the implementation to 2014,” Konrad Hanschmidt, an analyst at BNEF in London, said yesterday in an
e-mailed research note. “The market will now turn its attention
to the incoming auctioning supply that we continue to expect to
send EU allowance prices to historical lows.”
The regulator must avoid flooding the market with permits,
EU Climate Commissioner Connie Hedegaard said Nov. 14. Market
operators need clarity on the backloading before the end of this
year, while the Commission is highlighting options for a
permanent fix to the oversupply, she said.
The front-year contract has dropped 26 percent in the last
12 months. Benchmark carbon traded as low as 1 euro cent a ton
on Nov. 30, 2007.
To contact the reporter on this story:
Mathew Carr in London at
m.carr@bloomberg.net
To contact the editor responsible for this story:
Lars Paulsson at
lpaulsson@bloomberg.net
