The European Union canceled an auction of carbon permits for the first time, causing prices to drop to their second-lowest close on record.
The auction was canceled because bids failed to reach a secret reserve price, reported Bloomberg News. The price would have cleared "significantly" below the prevailing market rate, according to European Energy Exchange AG, Bloomberg reported.
The EU's Emissions Trading Scheme, the largest global carbon market, has been plagued by the falling price of carbon permits for years. The ETS saw the estimated carbon price drop 49 percent €5.82 per metric ton in 2012, down from €11.45 per metric ton in 2011. In the past five years, carbon prices on the ETS have plummeted nearly 90 percent.
The EU's ETS gives and sells carbon allowances to factories and power plants to cover their emissions. This year, some countries including Germany and Greece began selling more than 40 percent of their allowances in auctions instead of giving them away for free, reported Bloomberg.
Analysts have warned the ETS faces the prospect of carbon prices in Europe inching closer to zero unless policymakers quickly agree to take action, either through backloading or some form of long-term structural change.
Failed auctions could push carbon emitting permits prices even lower as unsold credits are held over, causing further oversupply.
In related news, the European Commission outlined new targets for reducing greenhouse gas emissions and using more renewable energy by 2030, according to a policy paper viewed by Reuters.
The policy paper proposes a 40 percent reduction in carbon emissions from 1990 levels and a goal that renewable energy will supply 30 percent of all power needs, both by 2030, reported Reuters.
The 27-member bloc currently has a set of three targets for 2020, which include cutting emissions 20 percent, increasing renewables to 20 percent of total energy and improving energy savings by 20 percent.
