European Union carbon prices jumped after the EU Parliament environment committee backed a draft rule requiring the bloc’s executive to propose a temporary cut in permit supply in the next phase of its carbon market. Carbon allowances rose as much as 32 percent on speculation that an amendment to an energy efficiency law voted today raised the likelihood of the EU curbing oversupply and supporting prices in its emissions trading system. Concern that the new energy- savings regulations will further cut demand for pollution rights at a time of economic slowdown helped knock carbon prices to a four-year low last week. Analysts at Bloomberg New Energy Finance predict that the EU market will be oversupplied by 997 million metric tons, or 9.6 percent, from 2008 to 2012. This surplus may be transferred into the second phase from 2013 to 2020, in which New Energy Finance predicts a net shortfall of 749 million tons. Rising carbon prices will add to energy costs.
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