Sceptre International Group Limited – EU Carbon Advances for First Year in Three as Economy Recovers

Dec. 31 (Bloomberg) — European Union carbon permits snapped two consecutive years of decline amid signs the region’s economy is recovering from recession and bets that demand will rise as the emissions system moves toward auctions.

Allowances for December 2011 delivery in the world’s biggest cap-and-trade program gained 7.7 percent this year after falling 23 percent last year and 29 percent in 2008. They traded at 14.16 euros a metric ton as of 9:34 a.m. on London’s ICE Futures Europe exchange.

“The economic recovery is definitely the main reason for the increase,” said Roman Richter, a trader at UniCredit SpA’s Carbon Solutions group in Munich. “More and more industrial consumers are also taking into account that they will have to buy permits at auctions after 2012, so we are bullish about the price in coming years.”

The 27-nation EU, which gave away the majority of permits since it started its emissions trading system, or ETS, in 2005, will require most emitters to purchase their allotment of allowances when the second trading period ends in 2012.

The bloc will auction about 60 percent of all CO2 permits in 2013, according to estimates by the European Commission. That proportion will increase in coming years.

The cap for carbon-dioxide discharges for that year has been set at 2.04 billion tons, including aluminum and chemical makers joining the program in its third phase, which runs from 2013 to 2020. This would be worth around 29 billion euros at today’s prices. Airlines become part of the program in 2012.

Few Bright Patches

Still, the current five-year trading period is likely to remain oversupplied until it ends in 2012, according to Alessandro Vitelli, an analyst at IDEAcarbon in London.

“This year has been the most stable we had in a long time and it may continue next year,” Vitelli said. “The economic outlook for 2011 doesn’t seem to show too many bright patches. For the EU ETS there will be a whole series of regulatory changes and people will keep looking how to extract the most value from their freely allocated permits.”

Amid a sovereign debt crisis, governments across Europe are stepping up austerity measures to tackle deficits, making it harder for some nations to emerge from recession. Economic growth in the euro region may weaken to about 1.4 percent in 2011 from about 1.6 percent in 2010, according to the European Central Bank’s latest projections.

EU member states may decide as early as in January whether to back a proposal by the European Commission, the bloc’s regulator, to prevent imported emissions credits linked to certain industrial gases from the use for compliance in the European cap-and-trade program from the beginning of 2013.

The commission proposed last month to ban United Nations- sponsored offsets from projects that cut hydrofluorocarbon-23 and nitrous oxide from adipic acid production. Member states need to approve the proposal before it can enter into force.

UN Certified Emission Reductions for delivery in December 2011 closed at 11.35 euros a metric ton yesterday, gaining 3.2 percent this year. The contract didn’t trade today.

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At Sceptre, we have partnered with key companies within the carbon market to offer our clients the best quality credits available  in both the voluntary and compliant markets. Sceptre is both a  member of the Carbon Trade Exchange in London which has developed the worlds largest electronic spot trading platform for voluntary markets. The demand for these voluntary offsets, fuelled by corporate commitments to become “carbon neutral,” is growing rapidly. For more information, visit our website:

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