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U.N. offsets crash to 15 cents ahead of EU ban vote

LONDON, Dec. 12 (Reuters Point Carbon) - The price of U.N. carbon credits crashed to record lows on Wednesday on heavy selling by companies with large portfolios of Emission Reduction Units (ERUs), traders said.

ICE Futures Europe Dec 12 ERU contract opened at 32 cents, but crashed to a record low of just 15 cents in morning trade.
By 1550 GMT, it traded at 23 cents on relatively large volume of 7 million units traded.

“There must have been some big issuance today as there are three big counterparties that are involved in primary market that are selling aggressively,” said one trader.

A second trader said prices had been dragged down by an impending EU vote that could ban companies from using some credits in the EU Emissions Trading Scheme.

The EU’s Climate Change Committee will on Thursday vote whether to ban ERUs from countries that have not signed up to a second commitment period under the Kyoto Protocol.

The decision would mainly affect credits from Russia, which account for about a third of total supply.

The heavy selling dragged down CER prices, with the Dec. 12 contract falling to 31 cents, yet another record low, before it nudged up to 39 cents by the time of writing.

In the market for EU Allowances, the forward contract, which expires on Dec. 17, fell 1.5 percent to 6.74 euros versus Tuesday’s close.

“We bounced back too quickly from historic low last week, and it seems the price is now correcting back,” a third trader said.
He referred to EUAs 2012 touching 5.62 last Thursday followed by four days of consecutive increases, which pushed the contract above 7 euros to a one month high of 7.13 euros on Tuesday.

“People now realise that there was no fundamental reason for such a big jump,” he added.

Energy markets continued to give mixed signals, as front-year Brent crude rose 1.5 percent to $109.55/bbl, while front-year baseload German power dipped 0.2 percent to 45.60 euros/MWh.

At the time of press the EUA market saw 44 million allowances of all vintages changing hands.

By Andrew Allan andrew.allan@thomsonreuters.com and Marton Kruppa – marton.kruppa@thomsonreuters.com

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