Emissions traders think the fledgling European market has come under pressure from power companies trying to artificially inflate the price of allowances. Claire Byers, emissions trader at Fortis Bank, said manipulation of allowance prices "appeared to have happened."
According to market scuttlebutt power companies have bought allowances in sizes big enough to push up the price of both the allowances and forward electricity. Power companies need allowances to generate electricity so when the price of allowances starts to increase the price of power will follow. "There is an obvious arbitrage to be made on electricity prices," said a trader.
Market participants hope rising volumes will mean the price of allowances is less easily moved. The regulation comes into force in January and traders predict volumes will jump.
