EU carbon prices climbed to their highest level in four sessions on Wednesday as buyers were encouraged by higher-than-expected emissions data and fatter profit margins for coal generators.
The Dec-15 EUA settled up 22 cents at €7.19 on ICE, off the day’s €7.26 high.
“The data was supportive, I had been afraid the numbers would show a drop greater than 6% after most of the forecasts had been estimating around 5-5.5%, said one trader.
Preliminary like-for-like emissions data excluding aviation a showed a 4.8% year-on-year drop in 2014.
The benchmark carbon contract briefly rose 6 cents following publication of the data shortly after 1000 GMT but eased back before analysts published updated forecasts based on the figures.
The data suggests ETS emissions fell further than the annual decrease of the market’s overall cap, which reduces annually by 1.74% below 2012 levels between 2013 and 2020.
A second trader said this had spurred hopes that lawmakers pushing for an earlier MSR start would seize on the data as further evidence that quicker market intervention was necessary.
Shortly after the data was published, Europe’s climate commissioner Miguel Arias Canete on Twitter called for a “quick and robust MSR deal” as the EUA surplus was still growing.
However, Poland’s top clmate official Marcin Korolec ruled out any agreement on the bill that would introduce the measure earlier than 2021, in an interview with Montel.
The annual data publication has become less important for predicting carbon price movements as a massive surplus of more than 2 billion EUAs has built up while supply constant while demand collapsed from 2008 due to the economic downturn.
Analysts now base much of their price forecasts on assessing what prices will entice industrial companies to sell their surplus units, on the rates of hedging forward power sales by utilities that determine their buying patterns, and by predicting speculator reactions to lawmaker efforts to shrink the surplus.
That said, prices jumped by as much as 10% following last year’s data publication, after traders reacted to the vast initial difference between the raw figures and analyst expectations skewed by changes and expansions to the scheme brought in that year.
Meanwhile, traders said carbon was supported by a slight increase in German clean dark spreads, which could encourage coal power generators to step up electricity sales and in turn EUA purchases.
The spreads widened as ARA 2016 coal futures fell 65 cents to $56.85/tonne on ICE.
Today’s government EUA auction was also supportive. The UK’s sale of 3.1 million spot allowances cleared a cent above market and was more than twice subscribed.
By Ben Garside – ben@carbon-pulse.com
