By Mathew Carr and Ewa Krukowska
Nov. 4 (Bloomberg) -- United Nations emission offsets, potentially banned by the European Union after 2012, dropped to their lowest in more than three months.
UN Certified Emission Reduction credits for December 2010 fell 2.1 percent to 11.98 euros ($17.03) a metric ton today as of 5 p.m. on London's European Climate Exchange, which would be the lowest close since July 30.
UN credits can be used for compliance in the European Union's cap-and-trade program, the world's largest emissions market. The European Commission, the EU regulator, plans to present a proposal this month that may include a ban on credits related to projects that cut hydrofluorocarbons and nitrous oxide as soon as the beginning of 2013. These projects have produced about 72 percent of the credits supplied under the UN program since 2005.
Traders will seek to sell credits likely to be accepted indefinitely by the EU on brokered markets rather than on exchanges, which currently accept credits that may be banned in the future, said Dennis Mignon, a trader with First Climate in Bad Vilbel, Germany, today by phone. ``There is an increasing chance you will find people willing to pay a premium'' for non-banned credits, he said.
EU carbon allowances for December fell 2 percent to 14.40 euros a ton, extending their decline after passing through the 200-day moving average level of 14.56 euros a ton, according to Bloomberg data.
Back to Lows
EU allowances ``could go back to July/August lows,'' when prices fell to 13.34 euros a ton, after the 14.50-euro level was broken today, said Kris Voorspools, director of 70Watt Capital Management, a Luxembourg-based hedge fund that specializes in trading spreads in energy and CO2 markets.
Utilities need a carbon price of about 11.50 euros a ton to incentivize a switch to cleaner-burning gas, which requires about half as many permits as coal to produce power, Voorspools said today by e-mail.
The U.K., Europe's second-biggest emitter, today sold 4.4 million tons of spot EU permits for 14.51 euros a ton at an auction, the cheapest price in the past five auctions. The nation received 5.9 times more bids than allowances, the lowest level for the last three auctions.
--Editors: John Buckley, Raj Rajendran
To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or
m.carr@bloomberg.net
Ewa Krukowska in Brussels at +32-474-620-243 or
ekrukowska@bloomberg.net;
