London, 14 December 2011: Thomson Reuters Point Carbon

EU carbon prices fell to their lowest ever level on Wednesday, dropping to 6.58 euros as the euro currency and equities slid on U.S. fears that last week’s EU summit had failed to rein in the euro zone’s debt crisis. By 1000 GMT, the ICE ECX December 2011 EUA contract was trading at an all-time low after falling 6.4 percent compared to Tuesday’s 7.03-euro settlement.

Volume was steady with almost 4 million units changing hands. The drop sends the contract into unchartered territory, falling further than the previous low of 6.77 euros on December 6 as market traders see few signs of respite in the EU economy to boost demand for emission permits.

“I still don’t see any bottom to this market,” said one carbon trader, who said any positive sentiment from this weekend’s landmark U.N. climate summit in Durban was purely psychological as it brought no increase in market demand.

“It’s clear that Durban didn’t help, and Canada’s announcement of its Kyoto Protocol withdrawal tells you what little countries think about international agreements,” he added.

On Tuesday, Canada confirmed it was withdrawing from the 1997 Kyoto Protocol, still the only global agreement to tackle climate change.

Wednesday’s fall in EUAs extended the previous session’s 6.6-percent slide and came as the euro currency hit an 11-month low of $1.3007 after the U.S. Federal Reserve warned Europe’s unresolved debt crisis could hurt the giant American economy.

Last week’s agreement by EU leaders to strengthened the bloc’s fiscal discipline faces its first test of the market’s resolve on Wednesday as Italy attempts to raise 2-3 billion euros by selling bonds with borrowing costs above 6 percent.

Meanwhile, U.N.-backed carbon credits plumbed new depths after dropping almost 10 percent to record lows on Tuesday on expectation that the market would continue to face a deluge of supply.

The December 2011 CER contract trading on ICE Futures Europe was pegged at its low point of 4.06 euros, 36 cents below the previous settlement of 4.42 euros as the market absorbed 1.1 million ERU credits issued late last night from Russia.

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Source: Thomson Reuters Point Carbon - for Commodities Now with permission.