Carbon Falls to 2-Month Low as U.K. Emissions Drop Cools Demand

Mar 27, 2014 10:43 am ET

March 27 (Bloomberg) -- Carbon fell to a two-month low as a bigger-than-expected drop in greenhouse-gas emissions from U.K. power stations signaled demand for pollution permits may decline across Europe.

European Union carbon permits fell as much as 11 percent to their lowest since Jan. 25, according to the ICE Futures Europe exchange in London. Trading volume for the December 2014 benchmark contract more than tripled to a record.

Electricity generators in Britain cut carbon dioxide output by 8 percent last year as renewables filled coal’s declining market share, according to the government’s Department of Energy & Climate Change in London. High U.K. power prices may have spurred energy efficiency and lower consumption, according to Nomisma Energia Srl, the Bologna, Italy-based adviser to energy companies, banks and governments.

“This is a setback” for carbon prices because there may be a similar impact in other nations, Matteo Mazzoni, an analyst at Nomisma, said today by phone. He expected a 6 percent decline in U.K. emissions.

December carbon was down 8.7 percent at 5.36 euros ($7.30) a metric ton as of 2:17 p.m. on ICE. The contracts fell as low as 5.20 euros and were heading for their biggest drop in more than a month.

Traders bought and sold a record 65.6 million tons of December 2014 carbon permits, triple the amount that changed hands yesterday, ICE data show.

U.K. electricity consumption fell 0.5 percent in 2012 from the previous year, and was the lowest since 1998, according to DECC. Electricity generation declined 2 percent.

Mazzoni estimates emissions in Europe’s carbon market fell 3.6 percent last year. Verified emissions for 2013 for factories and power stations in the EU’s carbon market will be released on April 1 by the European Commission.

“I can see there’s a margin for a bigger fall,” Mazzoni said. “Traders are trying to anticipate the data.”