EU Carbon Has First Weekly Gain as Brexit Concern Seen Waning

  • Market has lower supply at auctions during August holidays
  • Other nations may imitate Sweden’s carbon plan: New Energy

European Union carbon allowances posted their first weekly gain since June 10 amid speculation the U.K.’s exit from the trading bloc won’t damage regional energy demand as much as first thought.

Benchmark permits rose 9.5 percent week on week, the most since April 22, while German power and summer natural gas prices gained, according to data from the ICE Futures Europe exchange in London and brokers.

“People are getting over the initial shock of the Brexit vote,” boosting carbon, said Jahn Olsen, an analyst in London for Bloomberg New Energy Finance. Prices gained before next month’s reduced auction volumes for the summer holiday, as well as from advancing energy commodities, he said.

Allowances advanced as lawmakers consider options to deal with oversupply in the market, which remains about the same as a full year of allowances, according to regulator the European Commission. On Monday, a French-government-appointed committee recommended the EU install a floor price in 2020 of as much as 30 euros ($33) a metric ton, more than six times the current price.

December permits rose 4.2 percent on Friday to settle at 4.98 euros a metric ton on ICE. German power for 2017 rose 3.7 percent for the week, while summer natural gas in the U.K. advanced 1.8 percent, its eighth weekly gain.

Summer Lull

Emission prices rose this week before the EU reduces the volume of allowances it auctions during the summer holiday period. Carbon allowances have risen every August for the past eight years.

Elsewhere in carbon markets, some European countries may imitate Sweden’s plan to buy and cancel permits, Olsen said. Sweden said July 2 it would spend 300 million krona ($35 million) a year on EU carbon allowances through 2040 that would further soak up supply.

“Germany is a possibility,” he said. The press office at Germany’s environment ministry didn’t respond to a phone call and e-mail seeking comment.

Before it's here, it's on the Bloomberg Terminal.