(BN) Barclays Raises Forecast for EU, UN Carbon Prices in


Barclays Raises Forecast for EU, UN Carbon Prices in 2011, 2012
2010-11-23 14:01:48.87 GMT

By Mathew Carr
Nov. 23 (Bloomberg) -- Barclays Plc raised its forecast for
European Union carbon prices in 2011, citing a lower-than-
expected supply of phase-three allowances to be auctioned over
the next two years.
EU prices will average 20 euros ($27) a metric ton next
year, 8.1 percent higher than previously estimated, Trevor
Sikorski, a London-based analyst at the Barclays Capital
investment bank, forecast today in an e-mailed report. The EU is
setting rules for the third phase of its carbon market, the
world's largest, for the eight years starting in 2013.
"We are still very bullish for increasing prices once
utility hedging of 2013 positions starts in earnest in the
second quarter of 2011," the analysts said.
Carbon prices are up 19 percent this year as utilities buy
EU pollution permits to hedge their forward-power sales and
Brussels-based regulators ration supply. EU regulators are
considering restrictions on United Nations emission credits in
under the Clean Development Mechanism for projects linked to
industrial gases.
Sikorski also boosted his forecast for UN Certified
Emission Reduction credits for 2012 to 20 euros a ton from 18
euros. He cut his estimate for the UN discount relative to EU
allowances that year by 20 percent to 8 euros a ton.
Any UN offset ban would "tighten up liquidity in the early
years of phase three by removing what will still be an important
part of supply in the market," Sikorski said.
The European Commission, regulator for the 27-nation bloc,
is considering excluding UN-sponsored credits related to
industrial gases including hydrofluorocarbons and nitrous oxide
starting in 2013. system. The commission said they may create
windfall profits for investors and undermine the integrity of
the EU. Investors can use credits earned in the UN's CDM for
reducing emissions in developing countries to comply with
quotas in the EU.

Systematic Weakness

"It's crucial to look into some weaknesses in the
system," EU Climate Commissioner Connie Hedegaard told reporters
on Nov. 19. "As soon as possible we'll come up with a suggestion
as how best to cope with that."
The Bonn-based environmental group CDM Watch said in a June
14 report that some companies won "bogus credits" by
artificially boosting greenhouse-gas emissions on HFC projects.

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--With assistance from Ewa Krukowska in Brussels. Editors: Mike
Anderson, Alex Devine.

To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or

To contact the editor responsible for this story:
Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net