LONDON - The benchmark contract for European Union carbon emissions futures rose two percent on Tuesday after a fairly steady morning's trade as oil prices firmed, traders said.
The Dec-09 contract for EU Allowances rose by 1.98 percent to 13.40 euros ($20.15) a tonne at 1402 GMT, with heavy volume at 4,194 lots.
It's mainly due to oil and someone was aggressively buying this morning which has ramped prices up, said an emissions trader.
Compliance buyers such as utilities were not involved in the buying activity, another trader said.
U.S. oil climbed to $78 a barrel on Tuesday, adding to the previous session's advance, as concern eased that Dubai's debt problems would set back the global economic recovery.
There could be also increased volatility as OTC contracts expire on Tuesday, other traders said.
For the coming week, the benchmark EUA contract should trade around 13 euros a tonne, and certified emissions reductions (CERs) around 12 euros, Societe Generale/orbeo analysts said.
We expect a range-bound week a bit lower than present levels, Societe Generale/orbeo analyst Emmanuel Fages said in a research note.
Traders said news of opposition plans to block an Australian carbon scheme was not a surprise and was not affecting carbon prices on Tuesday.
Australia's plans to cut carbon emissions headed for defeat in a hostile Senate after the elevation of a new opposition leader against carbon trade laws set a trigger for an early 2010 election.
New Liberal opposition leader Tony Abbott said conservative senators, many of them climate change sceptics, would reject Rudd's emissions trading laws if they were not deferred until early 2010.
German Calendar 2010 baseload power on the EEX was down 0.37 percent to 43.65 euros per megawatt hour.
CERs were up 26 cents or 2.13 percent to 12.46 euros a tonne.
Trading exchange BlueNext and financial services company Citi will auction 200,000 Emission Reduction Unit (ERU) auction in the first half of January 2010, the companies said on Tuesday.
Until now, most ERU trades have been done over-the-counter which has led to complaints about the lack of transparent pricing in the market.
(Reporting by Nina Chestney; Editing by xxx)