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EU Carbon Permits Fall to Three-Week Low on 'Huge Overhang'
2010-10-19 16:44:03.716 GMT
By Catherine Airlie and Mathew Carr
Oct. 19 (Bloomberg) -- EU carbon-dioxide permits fell to a
three-week low as a "huge overhang" of allowances damped
demand while their premium over United Nations offsets widened.
EU allowances for December dropped 36 cents, or 2.3 percent
to 15.02 euros a metric ton as of 4:55 p.m. on London's European
Climate Exchange. That's the sixth day of declines and the
lowest intraday level since Sept. 24.
"There is a huge overhang" of EU allowances that might
last until the end of the decade, said Alan Svoboda, executive
director of sales and trading at CEZ AS, the Prague-based
utility. "It's unfortunate the carbon-dioxide market is not
strong enough," he said today at a Platts emissions market
conference in Brussels.
The premium of European Union carbon permits for 2010 over
offsets from the United Nations advanced to its widest level in
more than nine weeks as UN supply rises.
The spread between EU permits and UN credits for 2010,
traded as a separate contract, increased as much as 11 cents, or
5.5 percent, to 2.10 euros a metric ton on London's European
Climate Exchange. The spread was 2.03 euros at 5:55 p.m., the
biggest gap since Aug. 16.
The spread between EU allowances and Certified Emission
Reductions from the UN "should slightly widen for all
maturities," Emmanuel Fages, the Paris-based head of power,
gas, carbon and coal research at Orbeo, said in an e-mailed
report yesterday. Orbeo is the carbon-trading venture of Societe
Generale SA and Rhodia SA.
'Downside Risk'
There is "more downside risk" for CER prices, Fages said.
"The growth in CER issuances observed during recent weeks
should push prices down." Some 2.98 million credits were given
out in the week through Oct. 19, according to data on a UN
website. Some 5.64 million have been handed out this month.
Investors in emission reduction projects under the UN's
clean development mechanism are "cashing in" credits "to mark
the profit before the end of the year, Marius Frunza, head of
structuring at Sagacarbon, the trading and advisory arm of
French investment company Caisse des Depots et Consignations,
said today in an e-mail.
''The bird in hand theory says in an uncertain market,
before Cancun in December, it's better to take profit from what
you have now, hence to sell'' emission credits, he said.
UN offsets for December slumped 2.5 percent to 13.07 euros
a metric ton. The contract has fallen 4.5 percent so far this
month, according to data compiled by Bloomberg.
For Related News and Information:
Top Power Stories: PTOP <GO>
Emissions-trading stories: NI ENVMARKET BN <GO>
Today's top Energy news: ETOP <GO>
European power-markets home page: EPWR <GO>
--Editors: Rob Verdonck, Alex Devine
To contact the reporter on this story:
Catherine Airlie at +44-20-7073-3308 or
cairlie@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net
