LONDON: European Union carbon prices dipped on Tuesday in a thinly traded market, weighed down by weak demand in an auction of carbon permits.
Front-year EU Allowance (EUA) futures closed at 6.33 euros ($8.35), down 2 cents on Monday's settlement.
"There isn't much interest from utilities over the summer months and you can see from the auction result there is a lack of demand for permits at the moment," a carbon trader said.
The European Union sold 934,000 spot EU carbon permits on EEX at 6.26 euros per tonne each on Tuesday, the exchange said.
The sale attracted bids for 4.43 million permits, giving it an over-subscription rate of 4.74, the lowest rate for a government auction since Aug. 8.
Liquidity in the carbon market was low on Tuesday. Around 8.5 million allowances of all vintages changed hands across Europe's main exchanges, including the auction volume.
Traders said carbon prices are also likely to come under pressure this week ahead of an increase in supply from government auctions.
From Sept. 1, sale quotas return to levels of between 8 million and 10.5 million allowances per week, compared with half that amount during the weeks in August.
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