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Emission permits fall to record as surplus sold, gas declines

Emission permits for 2007, the last year of the three-year first phase of a European trading regime, fell to a record as mild weather curbed energy demand, boosting a surplus of the allowances.

European Union carbon-dioxide permits for prompt delivery, trading in a market established in 2005 for power plants and factories, fell €1, or 15%, to €5.48 ($7.28) a metric ton, according to prices from the Powernext exchange in Paris on Bloomberg at 6 p.m. local time, yesterday. That's the lowest price ever paid for an EU carbon dioxide emissions permit. The European Commission, which regulates the world's biggest emissions trading regime, said in May it may have allowed EU member states to hand out too many permits through 2007, blaming inaccurate emissions data.
UK gas for delivery next summer has fallen 44% since its record in April, making the cleaner fuel more attractive. Coal produces double the emissions for each unit of power generated, compared with gas. „The whole energy sector is bearish for today and coming days,” said Steffen Kiselis, a trader at Vattenfall Trading Services GmbH yesterday, in Hamburg. „Gas is coming off while the coal market is stable,” said Kiselis, whose employer is a unit of Vattenfall AB, the Nordic region's biggest utility.
Baseload power in Germany for 2008 fell as much as €1.70, or 3%, to €54.60 a megawatt hour, according to prices from broker ICAP Plc on Bloomberg. That's the lowest since October 19. Carbon emission permits for December 2008, the first year of the five-year second phase, fell 75 cents, or 4.1%, to €17.50 a ton, European Climate Exchange prices showed. That's their lowest since December 22.

Germany, Europe's biggest producer of greenhouse gas, asked the European Commission late last month to allow it to import more emission credits in the five years starting 2008, after the regulator limited its grant of allowances. The nation, the world's third-biggest economy, has yet to determine how many 1997 Kyoto Protocol credits its factories and power stations will be allowed to import in the period, Tobias Duenow, a spokesman for the Germany environment ministry, said December 30 by telephone from Berlin.
„We want to talk with the European Commission,” Duenow said. „There has to be negotiations. The figures still have to be fixed.” Boosting the supply of imported credits could lower the price of EU allowances traded in forward markets and reduce power prices across the region, analysts have said. The incentive to curb emissions blamed for global warming also would fall as permit prices drop.

Latvia approved a plan to set its annual carbon-dioxide trading grant at 6.25 million tons, almost double the amount set by the European Commission. The Latvian cabinet approved a revised national allocation plan on December 28, Valdis Bisters, head of the climate and renewable energy department at the Latvian Ministry of Environment, said in a telephone interview from Riga today. The limit sets the number of tradable permits for each year between 2008 and 2012.
On November 29, the commission told the country the annual cap should not by higher than 3.3 million tons. The government initially proposed a 7.7 million-ton cap in August. Bisters said the government's calculation of the limit is in line with the methodology of the commission and reflects the needs of the country's industries. (Bloomberg)