European Union carbon permits dropped from their highest in almost two weeks as policy makers consider a plan to fix a glut of allowances.
EU carbon permits for December fell as much as 6.1 percent to 4.15 euros ($5.61) a ton on London’s ICE Futures Europe exchange before closing at 4.18 euros. They earlier rose to 4.76 euros, the highest since Jan. 24. United Nations Certified Emission Reduction credits for December declined 1 cent to 33 cents a ton.
EU allowances have surged 49 percent from a record-low 2.81 euros a ton reached on Jan. 24 as politicians consider a European Commission proposal to temporarily reduce new permits by 900 million metric tons over the next three years, a process known as backloading. The supply glut may reach “well over” 1.5 billion tons by the end of 2013, Jos Delbeke, the commission’s director general for climate, said at a conference in Brussels today.
As a part of the legislative work on the carbon-market rescue plan, the European Parliament’s environment committee is scheduled on Feb. 19 to vote on a draft change to the bloc’s carbon trading law. The change proposed by the European Commission, the EU regulatory arm, is aimed at enabling a separate measure that would delay the sale of some carbon permits.
“Until anything is decided and proposed legislation becomes law, the market is still fundamentally weak,” Eric Bickel an analyst at energy management company Schneider Electric SA in Louisville, Kentucky, said today by e-mail. “Until we have official word on that front, this market will be plagued by the gloomy fundamentals.”
Carbon permit price volatility has been high this year because of the lack of clarity on whether or not regulators will step in to support the market, Matthew Gray, a London-based analyst at Jefferies Group Inc., said today by e-mail.
“It’s hard to take this recovery that seriously given the market is morbidly oversupplied and intervention is still uncertain,” Gray said.