German Vow to Cancel Permits Sends Carbon to 11-Year High
German Vow to Cancel Permits Sends Carbon to 11-Year High
(Bloomberg) -- European Union carbon permits rose to an 11-year high after Germany signaled it will protect the region’s emissions market by canceling allowances to prevent a surplus accumulating as it closes coal power plants.
Germany may close about a third of its coal capacity in the next few years, and the government will request a “corresponding” withdrawal of permits issued in the system, Environment Minister Svenja Schulze said in an interview.
The remarks showed the strength of political support behind a program set in place to reduce a surplus in the market. Those efforts more than tripled the value of carbon allowances and increased the importance of the system in reducing emissions across the bloc.
“We’ve seen an encouraging rise in permit prices, so it’s no surprise that we see it as essential that the instrument continues to work as it should do,” Schulze said. “That’s logical. It makes no sense at all to implement an exit from coal here, only to export pollution licenses into the wider European system.”
It’s not certain that Germany will cancel allowances, since that could mean the nation forgoing 5 billion euros ($5.6 billion) of revenue it’s likely to earn through 2030 from the weekly auctions it holds, said Bo Qin, an analyst at BloombergNEF in London.
Schulze didn’t detail how many allowances might be canceled, nor did she provide the timing of any such move. She said continuing price tension was crucial for the market. “Scarcity is central to the aims of the European carbon trading market.”
Carbon for December surged as much as 6.6% to 28.31 euros a metric ton, the highest level since July 2008, according to data from ICE Futures Europe. EU lawmakers have been dealing with a glut in the market, limiting supply, and may tighten the bloc’s 2030 emissions-reduction target.
Germany is considering expanding carbon pricing to other industries, including transport. Schulze of the Social Democratic Party wants to increase the taxes levied on gasoline, diesel, heating oil and gas, following similar suggestions made by the Green party. The Green party is seeking a carbon price of 40 euros a ton, still 42% higher than current-market levels.
A panel of lawmakers is set to publish recommendations on Friday and Germany’s government may make a decision to expand carbon pricing as soon as next month, possibly in tandem with France.
To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net;Mathew Carr in London at m.carr@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Alaric Nightingale
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