EU Carbon Market Oversupply Could Reach 1.29 Billion MT
The Market Stability Reserve (MSR), designed to address oversupply in the EU carbon market, could contain as much as 1.29 billion metric tons (MT) of permits when it begins, according to Bloomberg New Energy Finance. This figure includes 900 million MT of withheld supply from the past three years through 2016, as well as a potential 390 million MT of unallocated allowances from the eight years through 2020. James Cooper, an analyst at Bloomberg New Energy Finance, explained that the unallocated volume could be dealt with through a consensus among market participants, potentially leading to upward price movement in May as increased certainty on strong market reforms emerges.
In line with this, the December 2015 carbon contract on ICE Futures Europe in London rose 3.2% to EU7.10/mt at 1:48 pm. Earlier, it had reached a peak of 3.5% at EU7.12/mt, the highest level since April 9, 2015. The market is experiencing bullish pressure as prices respond to the growing confidence surrounding market reforms.
