Carbon Drops as Parliament Group Reaffirms Rejection of Glut Fix

European Union carbon permits tumbled the most in six weeks after the biggest political group in the European Parliament reaffirmed its opposition to plans to temporarily withhold supply from the market.

The December futures contract dropped as much as 10 percent to 4.66 euros ($6.10) a metric ton on London’s ICE Futures Europe exchange after Eija-Riitta Korhola, the lead member of the European People’s Party on the backloading issue, said that the “vast majority” of the group’s lawmakers opposed the plan in a preliminary vote by a working group today.

The benchmark closed 8.1 percent lower at 4.78 euros, the lowest since March 26. Volume for the December future more than doubled from yesterday to reach more than 29 million tons, the most since March 21, according to ICE Futures data.

“The market responded to well-known information which was presented just one week ahead of the vote,” Milan Hudak, an analyst in Prague at Virtuse Energy sro, said by e-mail. “Though the reaction was very overdone, this was a serious blow when prices were expected to rise.”

The European Parliament is scheduled to discuss during a plenary meeting on April 15 a proposal by the European Commission to enable delaying the sale of 900 million permits in an effort to boost the price of allowances. A vote on the plan is scheduled to be held April 16, according to the Parliament’s preliminary agenda.

The European People’s Party holds 270 of the 754 seats in the assembly. Today’s vote in the party’s working group had 51 votes in favor of rejecting the Commission’s plan, seven against, and as many as seven abstentions, Korhola said on her Twitter Inc. account.

Matthew Gray, an analyst in London at Jefferies Group Inc., said Korhola’s postings created unnecessary volatility in the market in the lead-up to the parliament’s decision.

“The insensitivity of politicians is severely compromising the functionality of this market,” Gray said by e-mail.

United Nations offsets for December fell 2 euro cents to 41 euro cents a ton.

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