European carbon climbed to its highest level in more than a week on Monday as Latvia took another step towards finding consensus between EU nations on the MSR bill.

The Dec-15 EUA contract closed 29 cents higher at €7.17 on ICE, just one cent off the intraday high and its highest since April 9, after a strong auction pushed prices above the €7 market and triggered a spate of buying.

“For sure the €7 level triggered buying, but on OTC trades we were quite low and clients we spoke today decided to wait a bit more,” said one trader.

He said the impetus behind the upwards move was positive sentiment following Latvia’s offer to strengthen its compromise proposal on the MSR ahead of a technical meeting between EU government officials on Tuesday.

Along with putting backloaded EUAs directly into the reserve, it now advocates two of the three main options to strengthen the MSR bill but has so far been unwilling to give any ground on starting it earlier that 2021.

“It looks like the starting date is taboo, but with the working party on environment tomorrow and Coreper on April 29 the price should move even higher,” the trader said.

Latvia is aiming to find a common middle ground between national governments at the Coreper meeting to resume final trilogue talks on the bill with the other EU institutions.

Despite carbon’s gains, a near 1% drop in Cal-16 ARA coal prices helped keep German clean dark spreads steady.

The EU’s sale of 2.9 million spot EUAs cleared in line with secondary market prices at €6.88 at 0900 GMT, with a reasonably healthy bid-to-cover ratio of 2.18, auction hosts EEX said.

The front-year futures nudged up to €7 shortly after the sale and surged higher once the contract had broken above that mark.

Governments are scheduled to sell 11.95 million EUAs this week, down from the bumper 15.08 million sold last week.

By Ben Garside – ben@carbon-pulse.com