EU Carbon Has Biggest Drop Since Feb. 20 After Panel Vote

European Union carbon permits fell the most in more than a week after the EU parliament’s industry committee voted for a regulatory option that would temporarily withhold supply at an unspecified time.

EU carbon allowances for delivery in December dropped 5.2 percent to close at 9.02 euros ($12.13) a metric ton on the ICE Futures Europe exchange in London after the vote. They earlier rose as much as 1.3 percent to 9.63 euros, the highest for more than two months.

The contract jumped as much as 9 percent on Feb. 16, when representatives of all parties on the committee agreed to push for a set-aside amendment. Approving a temporary supply cut in the market will probably boost the revenue governments receive for selling emission allowances through 2020, Bloomberg New Energy Finance said Feb. 8.

The decision today is weaker than a previous plan approved by the parliament’s environment committee, said Isabelle Curien, an analyst in Paris for Deutsche Bank AG (DBK). “It now does not make it mandatory for the commission to withhold allowances,” Curien said in an e-mailed response to questions. “The door is left open for a future consideration of a set-aside, but the principle of a set-aside in itself is not secured.”

David Hone, Royal Dutch Shell Plc (RDSA)’s climate change adviser, called on the commission to propose temporarily withholding a “significant” portion of carbon allowances, without being more specific.

“Beyond the immediate need for a set-aside, the parliament will still need to address the longer-term sustainability of the emissions trading system,” Hone said today in an e-mailed response to Bloomberg. This is best done by including an auction reserve price for allowances after 2020, he said.

“A well-functioning emissions-trading system with a robust price signal will restore confidence in clean technology investment, reaffirm the flagship status of the scheme and reinforce the international credibility of the EU ETS,” he said. Hone is chairman of the International Emissions Trading Association, the lobby group.

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

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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