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UN Carbon Offsets Jump the Most in 17 Months on 'Guessing Game'
2010-08-19 13:04:12.431 GMT
By Ewa Krukowska and Mathew Carr
Aug. 19 (Bloomberg) -- United Nations carbon offsets rose
the most in 17 months after regulators said they are reviewing
projects that cut hydrofluorocarbons, fueling speculation that
the supply of credits will plunge.
UN Certified Emission Reductions for December 2010 gained
as much as 5.5 percent, the most since March 9, 2009, to 13.26
euros ($17.01) a metric ton 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 reviews are forcing traders into a "guessing game,"
because it is unclear what regulators will do next, said Andre
Marcu, head of policy and regulatory affairs at Mercuria Energy,
the Geneva-based oil and carbon trader. "If the intention is to
put up all projects on review, that should be made clear
upfront," Marcu said today by phone and e-mail. Trading credits
"requires good nerves," he added.
The premium of 2010 UN credits over 2012 contracts surged
43 percent to 77 euro cents a ton. Spot UN credits rose 5.2
percent to 13.27 euros a ton on the BlueNext exchange in Paris.
EU allowances for December gained 2.2 percent to 14.72 euros.
More Scrutiny
The Changshu 3F Zhonghao New Chemicals Materials Co. plant,
backed by BP Plc, Deutsche Bank AG, Enel SpA and RWE AG, was the
fourth project this week to face a review before the UN issues
credits.
The CDM, overseen by an executive board headed by Clifford
Mahlung, 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
