EU Carbon Has Biggest Drop in Three Weeks Ahead of U.K. Auction

European Union carbon allowances had their biggest daily drop in three weeks ahead of the U.K.’s final Phase 2 sale tomorrow.

EU permits for December fell 2.7 percent to close at 7.67 euros ($9.94) a metric ton on the ICE Futures Europe exchange in London, the biggest decline since Oct. 3. United Nations Certified Emission Reduction credits for December lost 13 percent to close at a record 84 cents a ton on an all-time high volume of 11.9 million tons. Emission Reduction Units for that month decreased 23 percent to a record 57 cents.

The U.K. will sell 4.3 million tons of EU allowances tomorrow in its auction, adding to supply in a market that’s dropped 30 percent in the past year. The third phase of the EU market begins next year and runs through 2020.

Eight EU governments will probably have 69.5 million metric tons of surplus UN offset credits in the five years through 2012, according to projections published today on the bloc’s website. That excess can be sold to factories and power stations in the EU market, boosting the size of its glut.

The nation with the biggest surplus in the period will probably be Netherlands, with 14.5 million tons, followed by Belgium with 14 million tons, according to the data. The information for government greenhouse gases excludes emissions covered by the bloc’s carbon market.

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