European Carbon Permits Climb Most in a Month After Auction

European Union carbon permits rose the most in a month after the bloc sold allowances in an auction at a price above the prevailing market level for the first time in more than six weeks.

EU contracts for December jumped 5.1 percent, the biggest increase since Dec. 7, to close at 6.66 euros ($8.73) a metric ton on London’s ICE Futures Europe exchange. Certified Emission Reductions for December rose 13 percent to 45 euro cents a ton.

The bloc sold 3.5 million tons of EU permits at 6.18 euros a ton in an auction hosted by European Energy Exchange AG. Day-ahead futures for Phase 3 permits eligible through 2020 were bid at 6.12 euros and offered at 6.21 euros on London’s ICE Futures Europe exchange at 10 a.m., when the sale ended.

It’s the first time the auction price has been more than the prompt cost since Nov. 23. The differential between the two may be considered by traders as a signal of market demand. Regulators are seeking to erode an oversupply in the system and in November proposed to temporarily cut volumes to be sold in auctions planned for the next three years.

At today’s sale, there were bids for a total of 9.2 million tons, 2.6 times the number of permits offered, according to data on the EEX website. That so-called cover ratio is the highest since Dec. 11 and below the average of 2.8 for all sales of Phase 3 permits.

Some emitters may be buying to cover shortages, Daniel Rossetto, managing director of Climate Mundial Ltd., a London-based consulting company that works in carbon markets, said today by e-mail.

Unlike the previous four years, factories and power stations can’t use allowances distributed this year for compliance against 2012 emissions, Rossetto said.

“Installations will not be allowed to borrow from 2013 allocations,” he said. The third phase of the market runs from this year through 2020. After the turn of the year, facilities will probably be getting a clear idea of their 2012 needs, he said.

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