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UN Carbon Offsets Jump the Most in 7 Months on Supply Concerns
2010-08-19 10:31:27.463 GMT
By Ewa Krukowska and Mathew Carr
Aug. 19 (Bloomberg) -- United Nations carbon offsets rose
the most in seven months after regulators said they are
reviewing projects that cut hydrofluorocarbons, fueling
speculation that the supply of credits will be diminished.
UN Certified Emission Reduction for December 2010 gained
5.3 percent, the most since Jan. 14, to 13.17 euros a metric ton
at 11 a.m. in London. CERs, awarded to projects that lower
emissions in developing nations, can be used to comply with the
European Union's emissions trading system, the world's largest
cap-and-trade program.
Regulators of the UN Clean Development Mechanism, the
second-biggest emissions market, said yesterday they won't
immediately issue tradable emissions credits to the developer of
a Chinese hydrofluorocarbon-23 project as they seek more
information. UN regulators are ramping up scrutiny after
allegations that some developers are seeking excessive credits
related to HFC-23, an industrial gas whose warming potential is
11,700 times more powerful than carbon dioxide.
"The news about HFC and speculation that there may be more
reviews are driving UN offset prices up," said Sanjoy Dutta,
director at UniCredit SpA's Carbon Solutions Team in Munich.
"The difference between CERs for 2010 and 2011 is already
substantial and may still rise by another 20 cents or so."
The premium of 2010 UN credits over 2012 contracts surged
43 percent to 77 cents a ton. Spot UN credits rose 3 percent to
13 euros a ton on the BlueNext exchange in Paris. EU allowances
for December gained 0.7 percent to 14.5 euros.
More Scrutiny
The Changshu 3F Zhonghao New Chemicals Materials Co. plant,
backed by BP Plc, Deutsche Bank AG, Enel SpA and RWE AG, is the
fourth project this week to face a review before the UN issues
credits.
The CDM said earlier this week it may review whether to
award credits on three other projects cutting HFC-23. It will
probably question all projects seeking emission credits for
reducing the industrial gas, the International Emissions Trading
Association said yesterday.
"We are going to revise our supply forecasts, given the
fact that the scenario featuring an impact of the HFC
controversy on existing, issuing projects is materializing,"
said Emmanuel Fages, a Paris-based analyst with Orbeo, the
carbon-trading venture of Societe Generale SA and Rhodia SA.
Credits from HFC-23 projects make up about half the supply
of offsets issued in the UN carbon market. Emitted in the
production of chemicals for air conditioning and refrigeration,
HFCs gained favor in the 1970s as an alternative to
chlorofluorocarbons, which scientists linked to depletion of the
ozone layer.
Windfall Profits
While HFCs don't interfere as much with the earth's shield
against damaging sunrays, they trap heat and contribute to
global warming.
The EU has said projects related to HFC-23 create
significant windfall profits and it will consider limits on
using them for compliance. The CDM is also assessing whether the
methodology for awarding those offsets should be changed after
allegations of misuse. Its executive board has concerns about
possible "excessive generation of Certified Emission
Reductions" from HFC projects, the UN regulator said yesterday.
"It's still hard to say by how much this could delay some
volumes post-2012 or altogether cancel them, but we are possibly
talking some hundred million tons," Fages said. "More
revisions should come, as there obviously exists doubt at the
executive board level now."
For Related News and Information:
Emission market news NI ECREDITS <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>
Sustainability, environmental indexes SEI <GO>
--Editors: Mike Anderson, John Buckley.
To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-2-237-4331 or
ekrukowska@bloomberg.net
Mathew Carr in London at +44-20-7073-3531 or
m.carr@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
