LONDON - The benchmark contract for European Union carbon emissions futures closed at a six-month low on Monday, having fallen as much as 9 percent in intra-day trade after a weak U.N. climate deal disappointed investors.
EU Allowances for December 2010 delivery closed 8.62 percent lower at 12.41 euros ($17.78) a tonne, after falling as low as 12.28 euros in the last hour of trade. EUAs have not traded at those levels since June 16.
Prices responded to news over the weekend that U.N. climate talks in Copenhagen ended with a bare-minimum agreement. Delegates said an accord struck by the United States, China and other emerging powers fell far short of the conference's original goals.
Prices fell 8 percent in opening trade and lost more ground toward the end of the day.
Traders said some utilities had tried to support prices around 12.60 euros for fear that a finish below that level would signal further declines to the technical analysts who study price charts for clues to future direction.
There is a big gap up to the technical level of 13.55 euros (on price charts) which needs filling now. If we close below 12.70 euros today it would be very bearish, one trader said.
Traders and analysts forecast last week that a weak deal in Copenhagen would make prices fall.
As the so-called Copenhagen Accord was weaker than a legally binding or a 'political' agreement many had foreseen, the European Union refused to scale up its emissions cutting target to 30 percent by 2020 versus 1990 levels from 20 percent.
A deeper cut would have increased demand for EUAs and U.N.-backed certified emissions reductions.
Traders said prices could fall to around 12.20 euros this week, just short of an 8-1/2 month low of 12.15 euros.
I see carbon slipping a bit more, sideways trading and then a slow climb back up toward 15 euros. The downside could be limited at the moment as we hit a cold spell and continue in to the New Year, said Andrew Ager, head of emissions trading at Bache Commodities.
Prices could face more pressure next year when industrial companies are expected to sell off excess permits and 2010 allowances are issued in February, adding to an already existing surplus.
Under the U.N.'s Clean Development Mechanism, certified emissions reductions closed 7.27 percent lower at 10.97 euros a tonne, their lowest level since June 17.
Investors in the CDM will be disappointed by the lack of detail on how the mechanism will be expanded after 2012, Citi analysts said.
(Editing by Anthony Barker)