wt bnef/EU Carbon Drops to Five-Month Low as Contract Expire


EU Carbon Drops to Five-Month Low as Contract Expires; CERs Rise
2010-12-20 17:31:27.67 GMT

By Ewa Krukowska and Mathew Carr
Dec. 20 (Bloomberg) -- European Union carbon allowances for
December fell to their lowest level in almost five months before
the contract expires today. Cheaper United Nations-overseen
Certified Emissions Reduction credits advanced.
EU permits lost 0.4 percent to 13.93 euros ($18.28) a
metric ton, which would be the lowest close since July 28 on
London's ICE Futures Europe exchange. The contract extended this
month's loss to 5.6 percent. It earlier today traded as low as
13.70 euros. CERs for December rose 1.6 percent to 11.90 euros.
Factories and power stations in the EU program, the world's
largest greenhouse-gas market by trading volume, can use cheaper
CERs for compliance instead of allowances. Through December 2012
they can use credits from industrial-gas cutting projects
proposed for a ban by the European Commission, the market
regulator, after that month.
The discount of CERs for 2012 compared with EU allowances
for the same month, traded as a separate contract, shrunk 7.8
percent today to 3.45 euros a ton, the narrowest since Oct. 14.
The volume of December EU allowances traded was 4.6 million
tons so far today, compared with 8 million for the whole session
on Dec. 17. The volume of December 2011 futures traded was 7.4
million tons as the contract fell 0.4 percent to 14.23 euros.
EU futures for December 2011 may rise as high as 14.70
euros a ton this week after prices fell too far, Bloomberg New
Energy Finance said.
"If anything, the market has been oversold in the end-of-
year rush and for this reason we point our trading range
slightly upwards," London-based analysts, including Matthew
Cowie, said today in an e-mailed report.
On the other hand, governments in the EU will hand out free
allowances early in 2011, the analysts said. "There is no
pressing need to buy at present."
German power for next year declined 0.8 percent to 50 euros
a megawatt-hour, according to prices from brokers compiled by
Bloomberg. Power stations in Europe are required to submit
permits for every ton of carbon dioxide they emit.

For Related News and Information:
Emission market news NI ENVMARKET <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>

--Editors: Rob Verdonck, Randall Hackley

To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-474-620-243 or

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