European Union carbon permits had the biggest quarterly gain in six years
European Union carbon permits had the biggest quarterly gain in six years as lawmakers consider permanent measures to curb a surplus that helped push prices to a record low. Specifically, December allowances climbed 25 percent since March 31, the most for a quarter since June 2008.
EU lawmakers are negotiating reforms to the bloc’s cap-and-trade emissions program, the world’s biggest, that include the creation of a permit reserve to control supply and help lift prices to levels that discourage burning of fossil fuels.
A start of the reserve before the 2021 proposed in January by the European Commission is a probable outcome because it is backed by nations including Germany and Italy.
Under the EU’s emissions market, permits allowing the holder to emit one ton of carbon dioxide are allocated for free or auctioned to about 12,000 factories and utilities that must have enough to account for their discharges or pay fines. Prices plunged from almost 30 euros a ton in 2008 as the financial crisis damped industrial demand for pollution permits.
In the temporary supply fix started in March, Europe will withdraw 900 million permits from the market through 2016 and return them in 2019 and 2020. That’s equivalent to almost half of the bloc’s annual supply. This measure was called backloading and it is seem that it has had a direct effect on prices this quarter.