Copenhagen disappointment hammers the European carbon trading markets

City A.M. Reporter
THE benchmark contract for European Union carbon emissions futures closed at a six-month low on Monday, having fallen as much as nine per cent in intra-day trade after a weak UN climate deal disappointed investors.

EU Allowances (EUAs) for December 2010 delivery closed 8.62 per cent lower at €12.41 (£11.04) a tonne, after falling as low as €12.28 in the last hour of trade. EUAs have not traded at those levels since 16 June.

Prices responded to news over the weekend that UN climate talks in Copenhagen ended with a bare-minimum agreement. Delegates said an accord struck by the US, China and other emerging powers fell far short of the conference’s original goals.

Prices fell eight per cent in opening trade and lost more ground towards the end of the day. Traders said some utilities had tried to support prices around €12.60 for fear that a finish below that level would signal further declines to the technical analysts who study price charts for clues to future direction.

Traders and analysts forecast last week that a weak deal in Copenhagen would make prices fall.

As the so-called Copenhagen Accord was weaker than a legally binding or a “political” agreement many had foreseen, the European Union refused to scale up its emissions cutting target to 30 per cent by 2020 versus 1990 levels from 20 per cent.