Up 30% since April. This will drive up manufacturing costs and slow economic recovery, but that hardly matters, does it? Carbon traders Al Gore and George Soros couldn’t be reached for comment.
Companies in Europe, which need allowances to match their emissions output, will be short of as many as 100 million permits a year through 2016, according to Goldman Sachs Group Inc. The gap, worth 647 million euros ($884 million) at yesterday’s prices, compares with a surplus of 2.1 billion euros in 2012, EU data show. Carbon futures may more than double by next year to 15 euros a metric ton amid the curb, said UBS AG.
The glut, accumulated since 2008, drove carbon permits to a record low and threatened the viability of the world’s largest emissions market. The European Commission is trying to lift prices to levels that will discourage the use of fossil fuels and spur cleaner energy by scaling back permits. That’s threatening to push up costs for factories, which have sold surplus permits for cash, as their need increases just as the 18-nation euro region is emerging from its longest recession.
“Most industrials weren’t creating a problem for themselves by selling carbon permits that were surplus to requirements,” said Fred Payne, a carbon trader in London at CF Partners (U.K.) LLP, which advised Portugal and Hungary on emissions trading. “Now, it’s an important decision whether or not to sell something that you’re going to need.”
Under the EU’s nine-year-old emissions market, permits allowing the holder to emit one ton of carbon dioxide into the atmosphere are either allocated for free or auctioned to about 12,000 factories and utilities that must have enough to account for their discharges or pay fines amounting to 100 euros a metric ton.
EU carbon allowance prices more than doubled from a record low in April and gained 30 percent this year to trade today at 6.43 euros on ICE Futures Europe in London at 7:49 a.m. That compares with a 0.9 percent gain in the Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities and a 1 percent gain in the Stoxx Europe 600 Index since the end of December.
Prices plunged from as high as 31 euros a ton in April 2006 as the financial crisis damped industrial output, curbing the need for pollution rights. Emissions from companies covered by the EU carbon market dropped 12 percent in 2012 compared with 2008, according to EU data compiled by Bloomberg New Energy Finance.