EU Carbon Gains for Third Week as Compliance Deadline Approaches

  • Crude-oil gains seen boosting emissions-market sentiment
  • Emitters need to cover 2015 output by April 30 deadline

European Union carbon allowances rose for a third week as emitters are seen buying before the yearly compliance deadline on April 30.

Benchmark allowances increased 2.2 percent as volume in the spot market advanced 11 percent to the highest since March 25, according to data from the ICE Futures Europe exchange in London. Carbon has gained in six of the past 10 Aprils as more than 10,000 factories and power stations covered by the world’s biggest carbon program prepare for the yearly deadline.

“April is usually a positive month for the market,” Matteo Mazzoni, an analyst at researcher Nomisma Energia Srl in Bologna, Italy, said Friday by phone. Some of the smaller companies adding to demand this month only trade once a year, ahead of compliance, he said.

Allowances plunged 40 percent during the first two months of 2016, wiping out two years of gains as traders bet EU nations haven’t done enough to deal with an accumulated surplus of allowances that’s about the same size as a full year’s supply. The German environment ministry said last week it’s willing to consider new measures that would strengthen the system.

“There’s some last-minute buying,” Anatoly Stolbov, an analyst at Virtuse Energy s.r.o., said by phone from Prague. Advances in crude oil have also helped sentiment in the carbon market, he said.

December carbon allowances fell 1.1 percent Friday to 5.55 euros ($6.28) a metric ton by 3:30 p.m. on ICE, paring the weekly gain. Volume in the spot market, which would provide allowances for compliance, advanced to 3.3 million tons on ICE.

Allowances may not rise much further because power utilities that provide most of the demand are suffering the worst profits for coal electricity for about five years, Stolbov said.

“I don’t expect any extraordinary rallies,” he said.

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