U.K. Gets Lower Price in Carbon Auction Than Germany

By Mathew Carr

Nov. 19 (Bloomberg) -- The U.K., the European Union's second-biggest economy, sold emissions allowances at a price 32 percent lower than an average for German sales as slumping energy demand has pushed down the cost of carbon credits.

The U.K. got 16.15 euros ($20.37) a metric ton in today's sale of 4 million metric tons of EU carbon dioxide allowances, according to data compiled by Bloomberg, which provided the auction platform. Germany has gotten a price of 23.58 euros a ton, on average, in auctions in the first 10 months of this year, according to a statement from the Environment Ministry.

Under the EU's greenhouse-gas trading program, the world's largest, governments have handed out most permits for free to about 11,000 factories and power plants. Some nations are selling as many as 10 percent of their allowances in the five years through 2012. The permits fell to a 19-month low today.

``I don't think it would have been right to pull the auction'' because of low prices U.K. Treasury Minister Angela Eagle said in a phone interview. The nation had reserved the right to set a floor price and sell fewer than the 4 million tons. Going ahead ``helps give stability'' to the carbon market, Eagle said.

Germany started its sales in January via development bank KfW Group. Prices rose as high as 29.69 euros on July 2, according to the European Climate Exchange in London, the biggest bourse for emissions trading.

Buyers' Potential Profit

The spot price was 16.59 euros as of noon London time, according to the Bluenext SA exchange in Paris, providing a potential profit of 1.8 million euros for today's buyers.

Buyers in the auction bid via so-called ``primary participants,'' which were Barclays Capital, BNP Paribas SA, JPMorgan Chase & Co. and Morgan Stanley.

The U.K. sold 3,999,875 tons of allowances and got bids for 16.6 million tons, the U.K. Debt Management Office said.

EU allowances for December fell as much as 44 cents to 16.11 euros a metric ton after the auction, a 19-month low on the ECX. They were at 16.61 euros as of 12:06 p.m. London time.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net