EU to Sell Record Carbon Volume in 2013 as Regulator Seeks Cut

The European Union will sell a record volume of carbon permits next year in the bloc’s market, the world’s largest, as the regulator seeks to cut proposed sales volumes by 50 percent to counter plummeting prices.

Twenty countries will together sell 383 million tons on European Energy Exchange AG, and Germany will separately auction 183 million, the Leipzig, Germany-based bourse said yesterday. Poland will begin selling permits separately once it selects an auction platform. The U.K. will sell 95 million permits on the ICE Futures Europe exchange.

EU permit prices plunged to a record on Dec. 5 as the euro-zone crisis damped industrial output and demand for allowances. The EU proposes to hold back 900 million permits from auctions through 2015 to trim excess supply and boost prices. The auction calendar published by EEX yesterday does not take into account the proposed withholding of 400 million tons in 2013.

“Over the first quarter of 2013, auction supply will be roughly in line with our expected power sector demand,” Konrad Hanschmidt, an analyst at Bloomberg New Energy Finance, said in an e-mailed response to questions. “There will be weeks when the supply will exceed the compliance purchasing, as both demand from the power sector as well as supply volumes fluctuate.”

Wider Sales

Poland, the Czech Republic, Liechtenstein, Norway and Iceland, which have a combined volume of 68 million tons, have not been included in the schedule because “an auctioneer has not yet been admitted” for each country, Eileen Hieke, a spokeswoman for EEX, said in an e-mail today.

When these countries are admitted to the sales, volumes may average as much as 14 million tons a week, according to data compiled by Bloomberg. The U.K.’s fortnightly sales may add as much as 2 million tons a week, bringing the weekly supply to 16 million tons, according to EU data compiled by Bloomberg.

The 27-nation EU is moving to a wider sale of permits, now largely granted for free, to meet its climate-protection goals. Selling the allowances will add to operating costs for power generators and may encourage emissions reductions that can be achieved for less than the cost of the permits.

The bloc will start selling outstanding aviation carbon permits for 2012 in February, after freezing the sales process in November. These sales will continue through April, after which the EU will begin sales of Phase 3 aviation allowances, it said on its website. Airlines will have to surrender permits matching their emissions in 2012 no later than the end of April.

The EU said in a statement posted on its website yesterday that about 819 million allowances would be sold in 2013, after subtracting about 152 million tons that are to be allocated free of charge to 10 nations. This partial opt-out from auctioning gives electricity producers in those states the possibility to invest in modernizing power plants. The value of these investments must at least equal the value of the free allowances, according to EU law.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE