• Allowances have plunged 28% this year on accumulated glut
  • Nations consider French proposal for an EU-wide floor price

European Union carbon allowances rose for the first week since March as crude oil extended gains and nations evaluated a French idea to introduce a floor price.

Benchmark permits advanced 2.2 percent amid lower volumes as crude rose a second week. It’s too early to say if there’ll be enough support among member states to install a minimum price into the market, an idea pushed by French Environment Minister Segolene Royal, an official who asked not to be identified because the talks are private said May 17.

Allowances have plunged 28 percent this year as lawmakers consider new tools to lift prices. Earlier efforts that included withholding half a year’s supply of allowances from the market and planning a market-stability reserve of permits from 2019 have failed to overcome the glut.

The oversupply shrank 14 percent last year to 1.8 billion metric tons, still about a full year of allowances, according to data published yesterday by the European Commission in Brussels, which regulates the market. Without the effort to withhold permits, known as backloading, the accumulated surplus would have been 40 percent higher, it said.

“Our efforts to address the serious market imbalance start to bear fruit,” Miguel Arias Canete, climate action commissioner, said in the statement. “Back-loading is just the beginning. The market stability reserve will need to complete the work.”

Brent Crude

Benchmark permits fell 0.2 percent Friday to 5.99 euros ($6.70) a metric ton on ICE Futures Europe in London at 4:22 p.m. Brent crude gained 2 percent this week to $48.79 a barrel, after rising 5.4 percent last week.

Oil prices can influence carbon because some natural gas contracts are linked to crude in Europe. Lower gas can encourage utilities to switch from coal, which requires about twice the allowances.

The French floor plan was most recently discussed at a May 12 meeting of a working group composed of representatives of national governments in Brussels, said a spokeswoman for the Council of the EU, the body that represents the bloc’s 28 member states.

The Nordic region’s largest utilities Fortum Oyj, Statkraft AS and Vattenfall AB on Friday proposed that the EU carbon market should better reflect the ambitiousness of the Paris climate agreement.

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