Oct. 16 (Bloomberg) -- European Union carbon allowances rose the most in more than three months after German Chancellor Angela Merkel said she favored a proposal to bolster the region’s carbon market.
Benchmark EU permits for December gained 7.7 percent to 5.34 euros ($7.21) a metric ton on London’s ICE Futures Europe, the highest close since Sept. 27. It earlier rose as much as 11 percent, the biggest intraday gain since July 3. Merkel’s comments are her most explicit backing yet for moves to address an oversupply in the bloc’s 53 billion-euro cap-and-trade market through a process known as backloading.
“We need a certain degree of backloading of CO2 emissions so certificate prices return to a sensible level,” Merkel said in a speech today to a labor group in Hanover, Germany. “That’s OK, because the economic growth rates on which the pool of CO2 certificates is based haven’t happened in the last few years.”
The support of the re-elected leader of Europe’s biggest economy may help break a deadlock in EU talks on the emergency fix that has been exacerbated by the failure of Merkel’s second- term government to take a position on backloading. Prices fell as much as 92 percent from their 2008 high, making it more profitable to generate power by burning coal instead of cleaner natural gas.
“When certificate prices are higher, the sequence of power plants that are competitive will shift again,” allowing gas generation to compete with coal-fired plants, Merkel said.
--With assistance from Tony Czuczka in Berlin. Editors: Rob Verdonck, Matthew Brown