EU Carbon Permits Rise From Two-Month Low as SocGen Says BuyMathew Carr and Ewa Krukowska
European Union carbon permits advanced from a two-month low amid optimism that agreement will be reached on temporarily curbing an oversupply and Societe Generale SA recommended buying the contracts.
December carbon rose 2.7 percent, or 12 cents, to close at 4.61 euros ($6.18) a metric ton on the ICE Futures Europe exchange in London. The contract earlier dropped to 4.42 euros, matching its lowest since Sept. 4. It fell 51 percent this year.
The European Parliament may decide on a draft law to reduce the surplus of permits through a process called backloading and help boost carbon prices in a single vote next month, according to a letter sent from the head of the assembly’s environment committee, Matthias Groote, to parliament president Martin Schulz that was obtained by Bloomberg on Nov. 9.
“The decision was good news for the EU emissions-trading system since it essentially supports the backloading solution and sets up the possibility of an accelerated resolution,” Paolo Coghe, an analyst at Societe Generale in Paris, said today in an e-mailed report. “We believe this to be an opportunity to buy.”
The Nov. 8 accord by governments speeds up the process to withhold permits by eliminating the need to reconcile the final wording in negotiations, Groote said in the letter.
The proposal to temporarily withhold 900 million metric tons of carbon permits looks like a done deal, said Trevor Sikorski, an analyst for Energy Aspects Ltd. in London. The EU may withhold about 400 million tons next year, and the rest will come out of 2015 supply, he said.
“There will be pretty much no auctions in the second half” of 2014, Sikorski said today by phone. “Prices will gradually begin to drift upwards.”
The draft measure, which needs approval from EU governments and the Parliament to become law, was proposed last year as a temporary fix to alleviate an oversupply of emission permits, aggravated by the region’s economic crisis.