EU Carbon Permits Have Longest Weekly Rising Streak Since 2010Mathew Carr and Alessandro Vitelli
European Union carbon permits had their longest weekly rising streak since 2010 as the bloc’s lawmakers were poised to give final approval on Feb. 24 for the market’s first intervention to fix a record glut.
December carbon allowances advanced 8.2 percent since Feb. 14 for a sixth week of gains, the longest period since September 2010, according to prices from ICE Futures Europe exchange compiled by Bloomberg. Ministers in the Education, Youth, Culture and Sport Council are scheduled to vote on the measure known as backloading when they meet in Brussels.
The plan would remove about half of one year’s supply of allowances through 2016, returning them near the end of the decade. As the 18-nation euro region is emerging from its longest recession, the European Commission is trying to lift prices to levels that will discourage the use of fossil fuels and spur cleaner energy after prices slid to a record in 2013.
“Quite a few factors are working in favor of higher carbon prices,” said Michael Weis, energy and sustainability analyst for Schneider Electric SA in Louisville, Kentucky. “Expectations for the EU economy are much more optimistic,” adding to this year’s gains stemming from previous policy-maker approvals of the intervention plan, he said by e-mail.
Allowances rose 55 cents this week to close at 7.23 euros ($9.93) a metric ton on ICE. They jumped 46 percent this year, the third biggest gainer after coffee and U.S. natural gas of 80 commodities tracked by Bloomberg.
To help drive global economic production, G-20 host Australia is this week pushing for a growth target, an idea that’s met with support from the International Monetary Fund and U.K. and skepticism from Germany.
Power utilities needing allowances are increasingly buying longer-dated contracts as hedging of power sales through 2015 is largely complete, Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said yesterday.
The volume of Dec. 2016 carbon contracts rose to a record 17.1 million tons on ICE this week. Last week’s amount was 14.9 million tons, then an all-time high.
Utilities won’t be able to meet additional demand for power from renewable generation growth, “leaving carbon-emitting sources to pick up the slack,” Weis said.
The market’s surplus reached a record 2.4 billion tons last year, more than this year’s expected full supply of 1.8 billion tons, according to Bloomberg New Energy Finance in London.