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EU, U.N. Carbon Prices Tumble To New Record Lows

Date: 15-Dec-11
Country: UK
Author: Jeff Coelho

European Union and U.N.-backed carbon prices plunged to new record lows on Wednesday, beset by worries about Europe's economic turmoil and uncertainty about a future global climate pact.

Carbon prices have shed more than 60 percent since June, as Europe's worsening debt crisis dented demand at a time when the EU emissions trading scheme, the world's biggest carbon market, is oversupplied with hundreds of millions of permits.

Benchmark EU carbon permits tumbled more than 8 percent on Wednesday to a fresh record low of 6.43 euros ($8.41)a tonne. They were at 6.51 euros at 1305 GMT.

Front-year U.N.-issued carbon credits, so-called certified emission reductions, fell 11 percent to a new record low of 3.92 euros a tonne.

Many analysts expect a net supply surplus in the EU carbon market through 2020 and beyond. The prospects of an EU-wide recession next year has dampened demand for carbon permits and U.N.-backed credits.

"There is a lot of volume coming into the market. We are very long and we have this economic crisis which is affecting demand," said Heiko Siemann, a carbon analyst at UniCredit Bank.

Adding to this, Canada on Monday became the first country to announce it would withdraw from the Kyoto Protocol on climate change, dealing a symbolic blow to the already troubled global treaty.

There is a "psychological effect" of Canada leaving Kyoto, said Kris Voorspools, a director at 70Watt Consulting.

"If more countries drop out, the post Kyoto context and the post-2020 context within the ETS is compromised," he said.

The EU carbon market caps emissions on some 11,000 polluting power plants and industrial plants in 30 nations through 2020.

On Sunday, more than 190 countries agreed to extend the Kyoto Protocol for at least five years and hammered out a new deal forcing all big polluters for the first time to limit greenhouse gas emissions.

Kyoto's first phase, due to expire at the end of next year but now extended until 2017, imposed limits only on developed countries, not emerging giants such as China and India. The United States never ratified it.

(Editing by Keiron Henderson and Jason Neely)

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