Carbon permits experienced a significant surge, rising as much as 3.4 per cent, the highest increase since January 13th. Ivo Belet, responsible for handling the draft for the legislature, stated that the market reserve should be established by 2018 and include allowances held for new factories, as well as those withheld from the market through 2016. The timing of when the reserve would start to reduce additional supply remains unclear, according to the draft proposal obtained by Bloomberg News.
To address the surplus, the European Union began withholding 900 million metric tons of allowances last year. It is estimated that an additional 500 million to 900 million tons of permits could be added to the market reserve, as they may not be required by new factories until 2020, according to Ecofys International BV, an environmental research company.
Louis Redshaw, the founder of Redshaw Advisors Ltd., which trades permits on behalf of factories, stated that the threat of a volume of permits returning at the end of the phase is driving the bullish sentiment. Additionally, other energy markets are also contributing to the rise in carbon prices. The current phase of the carbon market extends from 2013 to 2020.
On the ICE Futures Europe exchange in London, December carbon allowances rose 2.4 per cent to 7.65 euros ($8.73) per metric ton, reaching as high as 7.72 euros, the highest level since November 15, 2012. Analyst Patrick Hummel from UBS AG predicts that carbon could potentially double to 15 euros by the end of the year following the progress made in Brussels among lawmakers, referring to the compromise found as a clear positive.
The environment committee of the EU parliament plans to vote on the market reserve on February 24th.
