By Nora Buli
(Reuters) -A mechanism designed to curb costs in Britain's carbon emissions trading scheme (ETS) has been triggered for December, the authority overseeing the scheme said late on Tuesday.
Monthly average UK ETS carbon prices in September, October and November were all above the December trigger price of 52.88 pounds ($70.45) per tonne for the so-called cost containment mechanism https://www.gov.uk/government/publications/uk-emissions-trading-scheme-markets/uk-emissions-trading-scheme-markets (CCM).
The supply of permits can be increased to curb high prices under the CCM, which is triggered if average prices remain above a certain level for three consecutive months.
"The UK ETS Authority will now meet to consider what intervention, if any, to make," it said.
The decision will be communicated to the market no later than after trading hours on 14 December and will also set out the reasons for doing so, it added.
The authority would only intervene if it concludes that the current price level is not a result of market fundamentals, analysts at Refinitiv said in a note.
Intervention options included a redistribution of allowances offered at auction or increasing auction volumes for a calendar year, they added.
"With only two auctions left for the year...the authority is more likely to reallocate auction volumes next year to bring forward allowances for sale in the beginning of the year," Refinitiv said.
Britain began trading carbon permits under its new domestic ETS on May 19, having left the European Union's ETS since leaving the single market at the beginning of 2021.
The benchmark UK carbon contract traded down 5.92 pounds at 67.10 pounds a tonne by 1406 GMT after the latest UK auction cleared at 65.80 pounds/tonne.
Carbon prices in Europe and the UK hit record highs in November, triggered by a higher burn of coal by power companies, ambitious climate plans by Germany's incoming coalition government and progress on the role of carbon markets at international climate talks in Glasgow.
($1 = 0.7506 pounds)