EU Carbon Allowances Have Second Weekly Gain on Auction Bidding

  • Cover ratio in almost-daily sales improves at end of week
  • Federal Reserve reins in outlook for interest-rate rises

European Union carbon allowances rose a second week as bidding levels in almost-daily auctions rebounded from near their lowest in three years.

The cover ratio, or the volume of bids versus supply in the sales, advanced 51 percent on Thursday. The settlement price was above the market for benchmark allowances, which settled 5 percent higher that day. The futures are up 6.7 percent this week.

The strength in the auctions was underpinned by rising commodity markets, including bellwether crude, as traders bought after the Federal Reserve reined in the outlook for future interest-rate increases, said Bernadett Papp, a carbon analyst at Vertis Environmental Finance Ltd. in Budapest.

“If there is money to spend, markets are happy,” she said. “It really looks like risk-on is on.”

EU carbon dropped to its lowest for more than two years on Sept. 5 as a glut the size of a full year of supply curbs demand in the secondary market. Globally, carbon markets are failing to provide clear-enough market signals to drive investment toward green technologies, the United Nations Framework Convention on Climate Change secretariat said Friday in a report on its website.

This week’s gains occurred as the EU sought to fast-track its ratification of the UN climate deal struck in December in Paris. On Friday, Poland said speedy endorsement can only occur if its national interests are secured. The EU, which wants to lead the global fight against climate change, is under increasing pressure to formally join the deal after U.S. President Barack Obama and Chinese President Xi Jinping ratified it on Sept. 3.

December benchmark EU carbon allowances rose 5.2 percent to 4.61 euros ($5.21) a metric ton on Friday at 3:35 p.m. on ICE Futures Europe in London. Front-month crude gained 4.2 percent this week, the most since Aug. 19, while U.K. natural gas for summer next year advanced 8.4 percent, according to ICE data.

Trading volume of benchmark carbon rose 41 percent to 59 million tons for the week, the most since July 15.

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