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The price of UN-backed carbon offsets hit a record low of
€3.32 a tonne last week, as fears over the eurozone crisis
and on-going concerns about the long-term validity of some
certified emission reduction (CER) credits prompted a sell
off. Prices fell by over six per cent before rallying slightly
to over €3.60.
Speaking to BusinessGreen, Tom Greenwood, senior
analyst at IDEAcarbon,
said that the fall in prices had been driven by concerns over
the health of the eurozone following a series of downgrades
by credit agencies late the previous week.
However, he added that the widening gap between the price
of CERs and the price of the EU emissions allowances (EUAs)
traded in the bloc's emissions trading scheme (ETS), which
were trading on Tuesday (17th Jan), suggested low demand for
CERs was also being driven by concerns about the EU's impending
ban on offset credits issued by industrial gas projects.
The EU is planning to ban all CERs issued from HFC 23 emission
reduction projects from March 2013, in response to suspicions
that some projects designed to reduce industrial gas emissions
have been 'gaming the system' and generating excessive
revenue from the sale of credits.
Greenwood said that concerns are mounting that the CER market
is increasingly dominated by so-called 'grey' CERs
issued by industrial gas projects that will be banned from
the EU ETS next year. Meanwhile, the majority of 'green'
CERs, issued by UN-approved renewable energy projects, are
thought to have been sold using direct contracts or held back
by developers keen to see the price of offset credits rise
before they sell.
"Up to March 2013, we are likely to see all CERs treated
as if they are 'grey' CERs, as we think that the 'green'
CERs are not making it to the secondary market," explained
Greenwood.
"The market is oversupplied, so demand is driven by people
banking credits for the next phase of the EU ETS, but you
can't bank 'grey' CERS ... For CERs, I don't see the
price picking up much until after March 2013."
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