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EU Carbon Advances the Most in a Month After Cancun Agreement
2010-12-13 09:47:05.292 GMT
By Ewa Krukowska
Dec. 13 (Bloomberg) -- European Union carbon permits gained
the most in almost a month after envoys at the global climate
summit in Cancun, Mexico, reached agreements on a fund to manage
aid for poorer nations and reducing deforestation.
EU allowances for December 2011 rose as much as 1.8 percent
to 15.17 euros a metric ton, the biggest intraday increase since
Nov. 17, and traded at 15.03 euros as of 9:15 a.m. on London's ICE
Futures Europe Exchange. The contract extended this year's advance
to 14 percent.
Negotiators at the United Nations meeting in Cancun agreed
after two weeks of talks to a climate-protection package
including a fund that would manage a "significant share" of
the $100 billion annually pledged last year in aid for poorer
nations by 2020 and a plan to reduce deforestation. They failed
to agree on emission-reduction targets during the meeting, often
referred to as COP16.
"The Cancun outcome should be viewed as broadly positive
for the international carbon markets as expectations for COP16
had been very low and the international negotiation process to
address climate change has not run aground -- as many suspected
it would," analysts at Bloomberg New Energy Finance in London
wrote in a research note.
The meeting also approved carbon capture and storage
projects as eligible to generate UN offsets, known as Certified
Emission Reductions. CERs are issued to investors for projects
to cut greenhouse gases in developing countries under the Clean
Development Mechanism, the world's second-biggest carbon market
after the European Union's cap-and-trade program.
'Long and Challenging'
The EU said on Dec. 11 the agreement was an important step
on a "long and challenging" road toward a binding treaty to
tackle global warming. The 27-nation bloc is on track to meet
its internal target of cutting greenhouse gases by 20 percent by
2020 compared with 1990 and said it may deepen the goal to 30
percent should other nations follow suit.
It stopped short of doing so during the 2009 summit in
Copenhagen, citing inadequate efforts by the U.S. and China.
The next UN summit aimed at ironing out a global climate
framework for when the Kyoto Protocol expires in 2012 is
scheduled to take place next year in Durban, South Africa.
"For the EU allowances market, the Cancun Agreements
increase the likelihood of more ambitious long-term agreement in
the future," New Energy Finance said. "However, the market
risks getting ahead of itself if it believes the Cancun
Agreements will lead to an international agreement involving
binding emissions targets for the U.S., China and Japan --
arguably perquisites for the EU to move beyond its current 20
percent target in 2020."
'Clear Signal'
UN offsets for delivery in December 2011 gained as much as
1.3 percent to 11.55 euros, the highest level since Dec. 2, and
last traded at 11.49 euros. The contract lost 10 percent in the
past six months because of uncertainty over the future of the
CDM after the Kyoto Protocol's expiry.
"Parties at COP16 sent a clear signal that the CDM will
continue operation even if a gap will occur in 2013 between the
end of the Kyoto Protocol's first commitment period and entry
into force of a subsequent treaty," New Energy Finance said.
"This is critical, as it looks very likely that a replacement
treaty will not be in place by Jan. 1, 2013."
The improved CDM rules "will expedite delivery of CERs
from existing projects, and inclusion of CCS as an eligible
technology type may also boost supply in the long term," and
that could pull down prices, New Energy Finance said.
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--With assistance from Mathew Carr in London. Editors: Mike
Anderson, Randall Hackley.
To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-2-237-4331 or
ekrukowska@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or
sev@bloomberg.net
