German EU allowances hit market

(pointcarbon, Oslo)German public bank Kfw on 2 January started selling the 40 million EU allowances Germany has set aside for selling this year, a spokesperson for the bank told Point Carbon

The bank had sold allowances on a forward basis, for December 2008 delivery, the spokesperson said in an e-mailed note.
The bank has been tasked with selling the allowances, after the German parliament last year cut the free allocation to power producers to make room for auctioning or sales of EU allowances.

Germany, the EU's biggest polluter, is also the biggest government seller of permits in the EU scheme, which aims to cut emissions from power stations and industry across the 27-member bloc.

The country will sell 80 million allowances through Kfw over 2008 and 2009, but is drawing up plans for auctions to be held from 2010.

EU rules allow member states to withhold up to 10 per cent of the allowances they are allowed to issue, and to sell or auction these into the market.

However, few have chosen to do so. Besides Germany, the UK is set to auction 7 per cent of its allocation, which equals around 17 million allowances per year, and the Netherlands will put 3.2 million allowances per year on the market. Other countries will auction or sell smaller amounts.

Non-EU member Norway, which is in the process of linking to the EU scheme, is set to auction more than 50 per cent of its 15-million allocation. However, Norway's final figure has yet to be determined.

More than 2 billion allowances will be issued each year for the cap-and-trade scheme during the 2008-2012 period.

Allowances to cover emissions during 2008 do not have to be issued by member states before 28 February, meaning spot trades are currently not possible. When allowances have been issued, the bank will make both spot and forward deals, the spokesperson said.

The German environment ministry will issue monthly updates on how many allowances Kfw has sold, according to the spokesperson.

Oslo