EU Carbon Permits to Advance to 16.50 Euros Next Month, Says Sagacarbon

European Union carbon-dioxide allowances, or EUAs, will rise to 16.50 euros ($20.95) a metric ton next month as delays in the issuance of United Nations offsets spurs demand from utilities, according to Sagacarbon.

“We anticipate that the EUA value will be bullish towards a fundamental value of 16.50 euros before the end of the third quarter,” Marius Frunza, head of structuring at Sagacarbon, the carbon trading and advisory arm of French investment firm Caisse des Depots, said in a research note yesterday.

EU permits for December slipped 11 cents to 15.35 euros a metric ton at 3:15 p.m. on London’s European Climate Exchange. The contract has gained 8.5 percent this month, the biggest increase since April.

“The carbon markets have been less sensible to fundamentals for the last month or so,” Frunza said by e-mail today. “Fuel and power prices suggest that the CO2 price should be higher.”

Utilities often buy emissions permits at the same time they sell power, to protect against changes in prices. They sell power up to three years in advance. The emissions trading program’s third phase, which will reduce the number of free allowances handed to power generators, starts in 2013.

“Prices may rise until the end of the year as investors might perceive carbon permits as an undervalued asset and utilities might start to hedge power production for 2013, Frunza said.

To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net

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