LONDON: European carbon prices were headed for a 5 percent weekly loss on Friday as an expected inundation of permits from government allocations kept traders from betting on price rises due to an upcoming supply cut.
The December 2014 EU Allowance was flat on the day at 4.58 euros as of 1643 GMT on turnover of around 8 million units on ICE. That was down 23 cents on the previous Friday's finish.
The benchmark carbon allowance had dipped to as low as 4.53 euros, its weakest since Dec. 5, to continue a bearish run that has seen the contract end lower for eight of the previous nine sessions.
"Volume is still pretty low this early into the new year and I think it's quite hard to find the buyers that could start pushing prices back up," said one trader.
"The backloading measures should be having more of an impact, but on a day-to-day basis the market has to absorb a lot of supply and that is enough to create the negative trend," he said.
He was referring to the EU's plan to withhold from sale 900 million permits over the next three years in an effort to push prices to levels that encourage companies to invest in cutting their emissions.
Some 400 million permits are due to be withheld from auction schedules this year if lawmakers can complete the final scrutiny process in March.
Meanwhile, EU member states continue unabated, with governments holding daily auctions to sell off more than 4 million spot permits a day on average this month.
Earlier in Friday's session, Germany auctioned 4.6 million permits on EEX in a sale that attracted 14.28 million bids.
A second trader said that while analysts expected prices to rise over the next few weeks, few traders are willing risk buying permits ahead of additional government permit hand-outs.
National governments are still in the process of giving out last year's quota of permits to industry after large nations such as France and Germany took active steps in the process late last year.
"I don't see a lot of selling of that from most companies but the risk of a price dip but there is a fear that the allocations could send prices lower still," a second trader added.
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