The spot price for EU emission allowances (EUAs) inched back up above €12.15 this afternoon after hitting a nine-month low of €12.12 ahead of the latest UK auction of emission permits earlier today.
The drop in prices was mirrored by the price of EUA futures for delivery in December 2010, which similarly fell to a low of €12.25 before recovering to €12.42 by mid-afternoon.
The fall in prices came ahead of the UK auction of 4,886,799 EUAs, which fetched a price of €12.15 a tonne in an auction that was nearly five times oversubscribed.
Jurgen Hansen, senior analyst at Point Carbon, said that the fall in prices ahead of the auction was expected.
"We've seen that the market is typically bearish ahead of the auction of new allowances, as traders sell before the auction in the hope they can buy them back at the auction," he explained, adding that prices were also being depressed by pessimism in the market, resulting from the failure of the Copenhagen Summit to deliver a more ambitious deal.
Experts predicted that the price of EUAs could yet slip further, as prices are being propped up by the cold weather across Northern Europe that has led to rising gas prices, which have in turn driven up the demand for emission allowances.
There are also concerns that prices could remain low through to April when the EU releases emissions data for 2009.
"The dark horses are the industrial players who are holding excess allowances," explained Hansen. "We could see industrial selling kick in, but they could also choose to hold on to them and roll them over into phase three [of the ETS]."
The nine-month low came as Reuters reported that a number of carbon trading desks are looking to diversify their operations as frustrations grow over the perceived failure at Copenhagen and the sluggish nature of the market in recent weeks.
The news agency reported that Paris-based COER2 Commodities will be trading in crude oil futures, natural gas, gold and base metals from mid-January, while Fortis Bank Netherlands also began to diversify into energy markets last month.
"I have put my best people on soft commodities and oil," Seb Walhain, the bank's head of environmental markets, told Reuters. "At the moment, I don't see there is a proper business to be had in carbon."
The depressed nature of the market is likely to continue for several months with a recovery dependent on the strength of the economic recovery and the prospects of a US cap-and-trade bill being passed.
It was not the ambitious and binding agreement business leaders had been hoping for, but nor was it the disaster NGOs claim 21 Dec 2009
Price of EU carbon allowances bounces back to more than €13 in trading today, after report confirms carbon price fell 21 per cent in 2009 04 Jan 2010
Energy firms predict further increases in carbon price are imminent if phase three allowances are not auctioned earlier 04 Dec 2009
Research note says price of EUAs will rise 10 per cent during 2010 as industrial firms hedge bets ahead of phase three 08 Jan 2010As government completes its latest auction of carbon credits, analyst warns recovery in prices could prove short-lived 04 Jun 2009
Desert tortoise fears allayed? 19 Mar 2010
Cameron presents pre-election energy policy, promising greater investment certainty for low-carbon projects, green loans for households, and streamlining of planning system 19 Mar 2010Joint statement from carbon exchange and Hungarian government aims to restore confidence in CER market 19 Mar 2010
More news
From climate change contrarians to the "KitKatastrophe" of Nestle's palm oil policy, we look at the best the green web has to offer this week 19 Mar 2010
"It needs the political enthusiasm that was behind the war on terror after 9/11" 19 Mar 2010
From the government's plans for a marine energy revolution to John Lewis' proposals for an off-grid supermarket 19 Mar 2010 More in-depth
Post your comment
Send an email to the Business Green editor at feedback@businessgreen.com
