Wednesday, January 27, 2010

Carbon Markets Are Under ‘Dark Cloud,’ Merrill Says

From Bloomberg via BusinessWeek:
Carbon markets are under a “big, dark cloud” of uncertainty about future regulation and falling natural-gas prices, analysts at Bank of America Merrill Lynch said in a research report.

European Union carbon dioxide emission volumes from fossil fuels probably dropped 9.5 percent last year, reducing demand for EU permits, Merrill analysts including Sabine Schels said today. The EU market probably has 166 million too many allowances in the five years through 2012, they said. Prices are holding up because allowances can be saved and used after 2012, the report said, without giving a specific forecast.

“A string of bearish signals is currently hanging over the European and global carbon markets like a big, dark cloud,” Merrill said. “Last week’s resilience in pricing seems particularly remarkable in light of the energy complex selling off and temperatures warming up.”

EU carbon prices fell 1.6 percent last week as benchmark crude oil dropped 5.6 percent. EU emission allowances declined 34 percent the past two years as the recession reduced demand in the world’s biggest greenhouse gas market.

Selling by factories with spare permits may weigh further on prices, Merrill said. “We do not foresee significant price upside over the next three-to-six months.”>>>MORE