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Emission Credits Rise as UN Pursues Buybacks, HFC Restrictions
2010-09-02 16:49:58.161 GMT
By Catherine Airlie and Mathew Carr
Sept. 2 (Bloomberg) -- Futures for 2010 in the world's
largest emission markets jumped to the highest levels in more
than two months as the UN regulator moved ahead on a five-year-
old plan to buy and cancel credits believed to be improper.
Certified Emission Reductions, UN overseen credits known as
CERs, rose 3.3 percent to 13.92 euros ($17.82) a metric ton as
of 5:45 p.m. on London's European Climate Exchange. That would
be the highest close since May 6. European Union permits for the
same year jumped as much as 2.7 percent to 15.80 euros a ton,
the highest since June 22.
The possibility of buybacks, proposed in a draft on the UN
website, could cut the supply of credits, Alessandro Vitelli, a
London-based analyst at IDEAcarbon, said today in an interview.
The move comes as both the UN and EU consider limits on carbon
offsets tied to hydrofluorocarbons, which can trap 11,700 times
as much as carbon dioxide and may have resulted in excess
credits for projects that purport to limit emissions of the
industrial gas known as HFC-23, regulators said.
The apparent simultaneous clampdown on HFC-23 and other
questionable credits "may be purely coincidental," Vitelli
said. "What is clear though is that the executive board is
perhaps wishing to come down hard on the process of auditing to
stop tainted CERs from being issued."
The UN has put out 430.8 million CER credits valued at 6
billion euros at today's price. The audit firm Det Norske
Veritas made an operating profit of about 150 million euros last
year, equivalent to about 10 percent of all credits issued to
HFC-cutting projects, Point Carbon, the Oslo news and analysis
company, said yesterday in an e-mailed statement.
'Regulatory Risk'
The UN-overseen regulator of the Clean Development
Mechanism, the world's second-biggest carbon market, is
separately reviewing credits tied HFC projects, crimping supply.
The premium of 2010 UN credits over 2011 futures, traded as
a separate contract, rose 3.2 percent to 65 euro cents a ton.
The spread yesterday matched its record high of 66 cents.
"Regulatory risk has started to overshadow the market, and
for the next few months that is going to be the main factor
determining prices," Mark Lewis, the Paris-based director of
global carbon research at Deutsche Bank AG, said by telephone.
The CDM's executive board has halted issuance of some
emissions credits after allegations that factories set up to
destroy HFCs have gamed the system to get more credits. At the
same time, the European Union is drafting a proposal to limit
the use of certain offsets from industrial gas projects,
including HFCs. Factories and power stations currently under the
EU's cap-and-trade program can use offsets to meet some
emissions limits.
'Real Risk'
"There is a real risk of a CER supply shortage," Lewis
said. "There may be fewer credits than would ordinarily have
been issued if it wasn't for the reviews."
The European Commission is unlikely to make a decision on
HFC or other emissions credits before this year's international
climate change meeting in Cancun, Mexico, he said. "It is very
clear they are going to be quite aggressive in what they
propose."
For Related News and Information:
Top Power Stories: PTOP <GO>
Emissions-trading stories: NI ENVMARKET BN <GO>
Today's top energy news: ETOP <GO>
European power-markets home page: EPWR <GO>
--Editors: Mike Anderson, Randall Hackley.
To contact the reporter on this story:
Catherine Airlie at +44-20-7073-3308 or
cairlie@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net
