Issue XCV

Carbon Newsletter

DBLM Solutions
06 September 2013 The EUA Dec’13  contract  is  currently  at  €4.96. The carbon price has continued it’s bullish run. Analysts have cited the high auction denmand yeterday morning which had a high cover ratio (Auction Volume/ number of bids) of 5.32, maybe contrary to expectations that the resumption of normal Auction volumes which restarted Monday would push prices down. The big news released by the European Commission last night is the fact that participants will receive 12 per cent less free permits for 2013. This data which was due out ;last February has driven the market upwards. In real terms this means that there will be 228million less free EUA’s in the market this year than previously thought.
Weekly Recap 30/08/2013 02/09/2013 03/09/2013 04/09//2013 05/09/2013 Volumes lots Week % ICE EUA Spot 4.55 4.49 4.40 4.54 4.95 2,590 8.79% ICE CER Spot 0.59 0.58 0.58 0.56 0.57 0 -3.39% ICE EUA Dec’13 4.57 4.51 4.42 4.57 4.98 65,872 8.97% ICE CER Dec’13 0.59 0.59 0.58 0.56 0.57 3,299 -3.39%

These will be adjusted by a 'cross-sectoral correction factor' laid down in the decision which will vary each year, as foreseen by the ETS legislation. This will ensure that the total amount handed out for free does not exceed a maximum set in the ETS Directive.The correction factor has been made necessary by, among other things, the existing carbon leakage list. With many sectors featuring on this list, many installations are eligible for a high level of free allocation. It is now for Member State authorities to take the necessary steps to distribute the free allowances to installations via their accounts in the Union registry. This will take around one to three months depending on the procedures to be followed in each Member State. The decision represents a key milestone in the practical implementation of the 2009 reform of the EU ETS. The decision is the result of a mechanical application of the legislation in force based on a long technical assessment, but it is politically important because it turns the longstanding goal of harmonised allocation rules across the internal market into reality.The EUA/CER spread widened this  week  to  €4.38 at close of business  last  night  versus  the  €3.99 spread we witnessed  the  week  before  and  €3.74 the previous week.

EEX held auctions last Thursday, Friday, and Tuesday,auction prices were  €4.57,   €4.54,€4.49,4.38  and  €4.75 respectively. The cover ratios for the above auctions were 5.32, 42.67,3.16,3.53 & 3.00 respectively (Cover ratio – Amount of bids/actual auction volume) In total an extra 14,163,000 EUA’s  were  brought  to  the   market place.

The decision provides the basis for calculating the number of allowances allocated for free and auctioned, respectively, but has no effect on the total amount of allowances put on the market in phase three (2013-2020). The actual number of allowances handed out each year will be based on harmonised benchmarks.

The contents of the Newsletter is not a recommendation, either implicit or explicit, to buy or sell emission permits. Contact: David Boles, Compliance Markets -Direct: +3531 4433 584; Mob:00353 831744707 DBLM Solutions is partly funded by the Wicklow Enterprise Board.

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