The prices of Certified Emissions Reductions (
CERs) trading on the European and US secondary markets have risen to their highest levels in four months following renewed doubts over the supply of the Kyoto carbon offset credits up to 2012.
A downgrade in the official estimate of expected total CER supply over the five years to 2012 saw prices rise last week, while the China earthquake has since added further doubt over the shorter-term flow of CERs from the
CDM’s biggest host nation.
Benchmark secondary CER prices for delivery in December 2008 rose above €17 last week and closed on Monday May 19 at €17.05 on the European Climate Exchange. The buying interest was also seen at the other end of the delivery timeframe with Dec 12s seen as good value at not much above the Dec 08 price, according to analysts at Climate Corporation. Dec 12s closed at €17.80 on the ECX on May 19.
Prices on the NYMEX Green Exchange in New York have risen to similar levels.
A report by the UNEP Risoe Centre said expected CER supply to 2012 was now 1.5 billion tonnes, down from 1.8 billion. This is due to delays in validating and registering projects and in the verifying of emissions reductions, which is holding up issuance of the credits.
China is expected to produce about half of all CERs in the first Kyoto commitment period but the recent earthquake in central Sichuan province puts in doubt about 15 Mt, or 3 to 5 per cent of the country's exepected supply over the coming year, according to analysts at Lehman. A number of projects, mainly wind energy and greenhouse gas destruction at factories, are situated within 150 km of the quake’s epicenter near Chengdu.
The quake will not only affect project operations but the ability of third party verifiers to get in and confirm emission reductions, Reuters reports Lehman saying, only adding to the bottlenecks already being experienced in the market.