EU Carbon Has Longest Rally Since 2008 Before Sept. Supply Boost
EU carbon permits rose for a fourth month, the longest rally since 2008, before the European Union was scheduled to announce its verdict on the distribution of this year’s permits after a seven-month delay.
The benchmark December futures contract advanced 5.3 percent in August and climbed 86 percent from a record 2.46 euros ($3.25) a metric ton in April. Carbon closed 0.7 percent lower at 4.57 euros a ton on ICE Futures Europe in London.
The European Commission, the bloc’s regulator, said in July it would announce its decision on the number of permits to hand out free of charge to industrial companies “during the course of September 2013.” To date, only 506 million of an estimated total of about 2 billion allowances for 2013 have been distributed. A permit covers one ton of carbon dioxide emitted.
“The market is moving sideways as people are waiting for news from the European Commission about the allocation of this year’s free permits,” Milan Hudak, an analyst at Virtuse Energy sro in Prague, said by e-mail.
The EU’s emissions trading system allocates for free or auctions allowances to about 12,000 factories and utilities, which must surrender enough permits to match their discharges of carbon dioxide or pay fines. The handout of permits is usually done by the end of February under EU rules.
The allocation delay comes as countries adjust to the eight-year-old trading system’s third phase, which began in January and runs until 2020. As of this year, power generators in western Europe no longer get free permits and the individual quotas for factories depends on their emissions efficiency.
The free allowances distributed by countries this year will cover about half of the annual pollution quota in the bloc’s emissions trading system, according to the EU.
United Nations Emission Reduction Units also gained for a fourth month, after falling to a record 6 euro cents a ton on May 1. The contract dropped as much as 30 percent to 28 euro cents on ICE Futures today, before closing at 36 cents.
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