Saturday, March 31, 2012

Carbon ‘like Titanic’ sinking on EU permit glut

Ewa Krukowska in Bloomberg: The plunge in European Union carbon permits is putting prices on course for their longest-ever decline and shows no sign of ending as member states wrangle over curbing a glut in the market.

EU allowances for December fell 5.2 percent this year, extending a streak of quarterly losses stretching back to March 2011. Prices may drop a further 50 percent and lawmakers will probably fail to cut supply in the world’s largest emissions market through a so-called set-aside process, according to UBS AG. For First Climate AG, an asset manager that advises the European Investment Bank’s carbon funds, emissions are unlikely to recover in the next quarter.

“Unless EU governments come up with a surprise decision to strongly support the set-aside or ambitious mid-term emission- reduction targets, I don’t see prices moving up much over the coming months,” Tuomas Rautanen, head of regulatory affairs and consulting at First Climate in Zurich, said by e-mail.

A surplus of permits and the inability of European nations to agree how to tackle the glut in the $120 billion market sent prices to an all-time low this year. Verified emissions data due on April 2 may show 2011 discharges from more than 12,000 factories and power plants in the region’s trading system fell short of the number of issued-and-sold permits for a third year, according to Bloomberg New Energy Finance...

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