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CO2 Market Value to Rise 10% as Price Drops, New Energy Says

Jan. 12 (Bloomberg) -- The value of the global carbon market will increase by about 9.8 percent this year on higher trading levels caused by a surge in European Union auctions, said Bloomberg New Energy Finance.

The value of traded allowances and credits will advance by 9 billion euros to 101 billion euros ($128 billion) this year after rising 9.5 percent last year to 92 billion euros, New Energy Finance said yesterday in an e-mailed statement. Volume jumped 22 percent to 8.2 billion metric tons in 2011.

European carbon permit prices for December have dropped 51 percent in the past year, as the region’s debt crisis weakened the region’s economy and supply of offset credits from developing nations rose. California expects to hold two auctions of allowances this year, under proposals for its market, which begins in 2013. Australia’s program begins in July.

The volume-weighted average global price in 2012 will be 10.40 euros a ton, 7 percent less than 2011, said Guy Turner, director of greenhouse-gas and power research at New Energy Finance in London. The price drop will be more than offset by an 18 percent surge in volume to 9.6 billion tons, he forecast.

“You’ve got more opportunities for banks to buy into auctions, to play intermediary roles,” Turner said yesterday. The European Investment Bank, selling 2013 carbon for the first time, offloaded 12 million tons of allowances last month to unspecified banks, it said yesterday. The sales generated 97.8 million euros for carbon-capture and renewable-energy projects.

‘Excessive Volatility’

Europe may sell and auction at least 246 million permits in 2012, more than double the 99 million that was sold last year, according to data compiled by Bloomberg.

The European Union, which made up 78 percent of the global market last year, has started selling allowances rather than giving them to factories and power stations for free. New Energy Finance counts these sales as part of its volume numbers. It doesn’t count allocations granted free of charge.

“We previously warned that excessive volatility in carbon prices could drive traders out of the market,” Turner said in the statement. “This hasn’t happened so far. In fact traders have been more active than ever.”

EU permits for December decreased to a record 6.38 euros a ton last week in intraday trading on ICE Futures Europe in London and were up 2.3 percent today at 7.20 euros as of 1:09 p.m. local time. New Energy Finance’s price forecast assumes an average price for 2012 futures contracts of 11.40 euros this year for EU allowances and 5.75 euros for United Nation Certified Emission Reduction credits. CERs for December rose 1.9 percent today to 3.81 euros on ICE.

‘Macroeconomic Risks’

Barclays Plc on Jan. 10 revised down its forecasts for EU and UN carbon prices, citing “macroeconomic risks.”

December EU emission permits will average 7.5 euros a ton in 2012, 38 percent lower than Barclays’s previous estimate of 12 euros, Trevor Sikorski, a London-based analyst, said. UN credits will average 4 euros a ton, he estimated.

“The European sovereign debt crisis remains far from being resolved, and the risk will weigh on the market for months to come,” Sikorski said. “A deeper recession in Europe remains a significant down-side risk for the market.”

California plans its first carbon auction on Aug. 15 and its second on Nov. 14, data compiled by Bloomberg show.

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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