We have seen emissions prices hit new lows with Fridays trading nearly breaking the €10 barrier, in phase 1 allowances (2005-2007). There is little doubt that most utilities are hedged for next year and the market is long, with virtually no buying strength coming in this has caused most to worry about whether the market will collapse. There is no doubt that the way to manage this market fall hedge by selling Phase I and buying Phase II allowances. Phase II allowances and national allocation plans have not been fully specified, causing players to hedge and now on the prospect of a rise. Not sure of absolute levels they know that the spread between Phase 1 and II will widen if the phase I price collapses and players start buying the back end of the curve.

Will this mean that the EUA curve will always been in contango not necessarily but it does look likely to remain this way for some time as the world is intent upon driving carbon change through.