As the European Parliament approved a proposal to fast-track efforts to prop up prices, European carbon prices surged to a 13-month but traders said the market may be over-heated and due for a correction.
The EU Allowance (EUA) price soared more than nine per cent to be as high as €6.74 a tonne following the vote by EU politicians.
The futures then drifted back down to €6.57, up €0.41 or 6.7 per cent on the day.
Reuters Newsagency reports volume was very strong with over 36 million units changing hands.
Australia’s fixed price Emissions Trading Scheme (ETS) is due to revert to a market based system in July 2015 when it will be linked to the EU ETS.
EU politicians voted in support of a request from the European Commission to shorten the scrutiny period required before it can withhold the first of 900 million permits from the market.
While the motion must be formally signed off by EU ministers at a February 24 meeting, the vote effectively removed the final hurdle for the 28-nation bloc’s executive to begin market intervention and withdraw 400 million allowances from government-backed auctions in 2014.
“Today’s outcome should provide confidence that auction volumes will be reduced significantly this year, thereby providing a supportive signal for EUA prices in 2014, targeting €6.50-€7.00,” said Marcus Ferdinand, head of EU carbon analysis at Thomson Reuters Point Carbon.
Reuters reports EUAs are up by more than 30 per cent since the end of 2013, making them amongst the world’s top performing commodities so far this year.
However, Mr Ferdinand added that prices could fall in the next few sessions as speculators take profits, a view echoed by one emissions trader.
“Long-term we’re going higher, but it’s tricky to say where we go in the short-term. It will be driven by speculator appetite to hold long positions so we’re probably due a bit of a breather,” the trader said.
“We’ve also got at least another month of regular auctions, so that could weigh.”
EU governments are scheduled to sell a total 106.2 million allowances between today and mid-March, fresh supply that must be absorbed by the market.
A group of 25 member states sold four million spot permits for €6.01 each, in an auction that attracted bids worth a total 16.8 million units.
