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Carbon Slumps as Glut Fix Progress Seen Hampered by German Talks

Oct. 21 (Bloomberg) -- European Union carbon permits for December declined the most since May as the slow pace of German coalition talks dimmed the prospects for a swift agreement on a plan to bolster the region’s carbon market.

The benchmark December contract fell 11 percent to close at 4.59 euros ($6.27) a metric ton on London’s ICE Futures Europe exchange, the lowest close since Sept. 4. Chancellor Angela Merkel, who won a third term last month, and Germany’s Social Democrats said they were prepared to negotiate through the end of the year to form a coalition government.

A proposal to temporarily delay the sale of some EU permits to boost prices, known as backloading, needs the backing of Germany’s government in order to gain a qualified majority in the bloc’s Climate Change Committee. Merkel last week said she favored the proposal, fueling carbon’s surge to a two-week high of 5.50 euros on Oct. 16.

“We expect the process of forming a coalition in Germany to be drawn out and thus do not expect any vote by the Climate Change Committee on backloading in 2013,” Milan Hudak, an analyst at Virtuse Energy sro in Prague, said by e-mail. “This moves backloading implementation to mid-2014 or later depending on the pace of the legislative process and the risk that the present Parliament might leave the vote for its successor.”

To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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