London, 1 May 2010

Carbon recorded an 11 month high Friday as the market made a fresh attempt to reach EUR 16. Emission rights ran up to EUR 15.98 late Friday on US GDP figures and end of month positioning by traders, said sources.  EU allowances for 2010 delivery were last higher on 2 June, last year, when the market peaked at exactly EUR 16. The US GDP figures, which showed a 3.2% growth for the country in the first quarter of the year, “were as expected,” a trader said. However, participants used the numbers “as an excuse to push up the market,” he added. 

There was some “ferocious buying,” said a second trader. However, the rise wasn’t on fundamental news, he added.

The market may have risen on traders with long positions buying to make their end of month positions look better, he said.

EU allowances for 2010 delivery rose to EUR 15.87 17.30 CET Friday, compared with EUR 15.39 in the cleared broker market, at the same time Thursday,

The German power market, which has mirrored carbon this month, rose more moderately. Baseload German power for next year delivery, increased to EUR52.35/MWh, up a notch from EUR51.99/MWh Thursday.

The market now has EUR16 “firmly in sight,” the first trader said, adding that it would definitely reach the number as hitting it has become a type of self-fulfilling prophecy.

Earlier in the day, carbon was boosted by the emergence, late Thursday, of an EU paper outlining a possible emissions cap cut.

The news, which broke last night, suggested the cap in the EU emissions trading scheme could be tightened from 21 to 34% below 2005 levels by 2020.

Since 2008, the EU has pledged to deepen its commitment to cut greenhouse gas emissions from 20 to 30 per cent if other major emitters take comparable action.

The ETS, which covers almost half of Europe’s climate-changing pollution, has been expected to take on an additional reduction burden should the bloc’s leaders agree on further cuts.

The deadline later today for installations to submit allowances to meet 2009 emissions had little impact on the market, several traders said.

“There’s no rush for coverage… (it’s) all gone smoothly,” said one trader.

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