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European Union carbon allowances rose to the highest in more than two years as Christmas holidays and a halt of almost-daily auctions damped supply.

The benchmark front-December contract advanced 2.4 percent to the highest since Dec. 20, 2012 on the ICE Futures Europe exchange in London. The volume traded was 30 percent of the three-month average.

Allowances increased 48 percent this year as the bloc began withholding about half a years supply to help deal with a glut that built up as renewable-energy subsidies encouraged a surge in clean generation with priority access to power grids. Lawmakers are considering additional measures including a permanent reserve to further erode the accumulated oversupply.

Higher German power contracts and the missing supply from auctions helped make carbon more expensive, Bernadett Papp, an analyst at Vertis Environmental Finance Ltd. in Budapest, said today in an e-mailed response to questions. The high volatility due to the Christmas holidays can have the result of reaching new highs.

The December 2015 benchmark rose as high as 7.36 euros ($8.97) before settling at 7.34 euros with 4.6 million tons trading. Volume of prompt contracts advanced 39 percent to 1.5 million tons, or 33 percent of front-December trading. For all of last week, the figure was 3.1 percent.

The high portion of spot trading indicates demand for compliance may be stronger than supply, said Louis Redshaw, founder of Redshaw Advisors Ltd. in London, which trades on behalf of factories.

There are few sellers and not all utilities bought everything they needed before auctions stopped on Dec. 16, Redshaw said today in an e-mailed response to questions. Auctions on the European Energy Exchange AG in Leipzig, Germany, resume on Jan. 8, which could push carbon contracts lower, Bloomberg New Energy Finance said yesterday.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Stephen Cunningham, Charlotte Porter

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EU Carbon Rises to 8-Month High as Holidays Cut Supply