European Union carbon permits may fall once lawmakers approve faster scrutiny of a plan to temporarily withhold some permits from auctions, according to Trevor Sikorski, an analyst at Energy Aspects Ltd.
A panel of European Parliament committee chairs will meet today at 2 p.m. Brussels time to discuss a proposal by the European Commission, the bloc’s regulator, to shorten the approval time required before the plan can go into effect. If the accelerated process is agreed, the European Commission may begin withholding permits as soon as April, Sikorski said.
“It feels as if carbon is being bought up a little ahead of the EU decision on backloading,” Sikorski said in a phone interview today. “When that decision comes, we may see a little correction before prices then start bubbling up when supply starts to be withheld.”
The commission is seeking to reduce a glut of permits that swelled to 2.4 billion metric tons in 2013, more than one year’s total supply, according to Bloomberg New Energy Finance. Permits for December advanced as much as 3.4 percent to 6.11 euros ($8.26) a metric ton on ICE Futures Europe, the highest since Jan. 16. 2013, and were trading at 5.99 euros a ton at 12:07 p.m. in London.
The regulator’s plan calls for 400 million permits to be held back from auctions this year if the plan is approved before the end of March, or 300 million if consent is given after that date.
“From the moment when political approval is complete to the start of withholding is a two- or three-week process,” Sikorski said. “I don’t see prices drifting more than 50 or 60 euro cents before physical supply starts to be affected.”
Carbon prices rose as much as 21 percent since the start of the year, as traders bet on the success of the so-called backloading plan, Sikorski said.
“In the last month or two, it’s been more a question of when and how much, rather than if” the EU will delay the sale of some permits, he said.