Environmental Markets & Commodities

CERs: Proposed sanctions against DOEs could lead to bullish market

Oslo, 1 September 2010

The upcoming Clean Development Mechanism ( CDM) Executive Board (EB) meeting agenda contains a proposal which, if adopted, could have serious financial implications for designated operational entities (DOEs) and for the supply of Certified Emission Reductions (CERs). The proposal, to place liability for the issuance of excess CERs firmly in the hands of DOEs, could result in constrained supply and increased demand for CERs, providing a strong bullish signal for the market, according to analysis by Point Carbon (a Thomson Reuters company) and the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

It could also mean that the DOE responsible for the validation, verification, or certification report of excess CERs would be liable and could be obliged to replenish these excess CERs with other CERs, or other carbon commodities, at considerable cost.

“This draft procedure, proposing the correction of significant deficiencies and the excess issuance of CERs, would be a very tough provision indeed, if adopted, as it not only targets situations where the DOE has wilfully caused the issuance of excess CERs or has caused it through gross negligence, but also less serious examples of negligence. It also appears that the procedures would be retroactive in the sense that a DOE could be forced to replenish CERs the EB decides it has incorrectly issued in the past”, says Kjetil Røine, Manager at Point Carbon and author of the analysis, who added, however, that the onus would be on the EB to prove that the DOEs’ work has “significant deficiencies” rather than the other way round.

The consequences for DOEs and for supply could be substantial if the procedures are approved. For example, so far, about 218 million CERs have been issued to HFC-23 projects, currently the projects attracting most controversy and subjected to the longest delays as they are scrutinised by the EB. Should 10% (or about 22 million) of already issued HFC-23 CERs be deemed as inappropriately issued, it would cost the DOEs in question up to EUR 150 million to replace these CERs at current sCER prices. In comparison, the operating profit in 2009 for DNV, one of the largest DOEs, was just short of EUR 150 million. DOEs need to have proper insurance in order to be accredited to validate or verify CDM projects.

If the EB agrees the proposals then it would form part of its recommendations to the COP/MOP in Cancun leaving it up to the COP to make a decision. If, then, the investigation of possible “significant deficiencies” is initiated and sanctions are indeed imposed on DOEs, this would likely exacerbate delays in both validation and verification in general because DOEs would become even more careful in their assessments. Some might even withdraw from the business altogether, perceiving the risks as higher than the rewards.

If a quantity of HFC-23 CERs is deemed excess CERs and must be replaced by other CERs, there would be the double effect of increasing supply constraints and increasing demand, at the same time. “In sum, the draft procedures for how to deal with excess CERs signal a strong EB resolve on such problems, which could put several DOEs in very serious financial trouble if implemented and could lead to both increased demand for CERs and constrained supply”, concludes Røine.

Ends --

Source: Point Carbon

EU's carbon offset limits: a boon for brokers?

London, 30 August 2010

New European Union proposals to limit the use of industrial gas carbon offsets in its emissions trading scheme from 2013 could be a boon for reeling carbon brokers as exchanges wait for clarity before they alter their offerings.

Read more: EU's carbon offset limits: a boon for brokers?

Climate aid reaches $30 bln goal, but is it new?

Oslo, 27 August 2010

Aid promises from rich nations to help poor countries slow global warming are reaching the $30 billion goal agreed in Copenhagen but analysts say much of that is old funding dressed up as new pledges. Officially, the promises total $29.8 billion, Reuters calculations show, apparently meeting a pledge of "new and additional" funds "approaching $30 billion" for 2010-12 made at the U.N. summit in Copenhagen in December.

But austerity policies to combat government debt problems and a re-labelling of past promises will undermine real funding that is vital to unlock a new U.N. climate deal by showing that the developed world is serious about taking a leadership role, analysts say.

Read more: Climate aid reaches $30 bln goal, but is it new?

ICE daily volume and open interest records: ECX

London, 26 August 2010

On 19 August, a record 12,000 ECX Certified Emissions Reductions (CER) contracts traded on ICE Futures Europe, including a record 7,060 contracts traded on the screen. Also in August, combined open interest in the ECX CER and EU Allowances (EUA) futures and options contracts surpassed one billion tonnes for the first time and currently stands at 1,035,091 contracts. Through 25 August, ADV in ICE Futures Europe's ECX emissions futures and options contracts is 25% higher than the year-ago period.

Read more: ICE daily volume and open interest records: ECX

Commodity Business Awards, 2010 – Nominations Open

London, August 2010

The Commodity Business Awards (CBAs) reward talent and excellence throughout the commodity markets ... whether that's in the physical and/or financial arena, in trading, risk management, structuring, finance, research, advisory, logistics, legal or specialist technology.

Read more: Commodity Business Awards, 2010 – Nominations Open

CDM reservations: IETA

London, 24 August 2010

From the office of Henry Derwent, President and CEO, International Emissions Trading Association:

Read more: CDM reservations: IETA

Markit and The Climate Registry to cooperate on benchmarking data

New York, 19 August 2010

Markit, a leading provider of financial information services, and The Climate Registry, a leading voluntary carbon footprint registry in North America, today announced a collaboration that will help The Climate Registry’s members and Markit Eco users benchmark and improve their emissions and energy efficiency performance.

Read more: Markit and The Climate Registry to cooperate on benchmarking data

Extreme weather unlikely to help climate talks

Oslo, 18 August 2010

Extreme weather in 2010 will spur more strident calls for action to combat global warming but is unlikely to break a deadlock at U.N. climate talks about sharing the burden between rich and poor. Islamabad, for instance, has blamed mankind's emissions of greenhouse gases for devastating floods that have killed up to 1,600 people. And Russian President Dmitry Medvedev similarly directly linked the summer heat wave on global warming.

Read more: Extreme weather unlikely to help climate talks

Allegro enhances functionality for Nat Gas trading & logistics

London, 16 August 2010

Allegro Development Corporation, the leading provider of energy trading and risk management (ETRM) software, announced today the release of Natural Gas 8.1, a component of the Allegro 8 platform that provides real-time position visibility and tools to manage natural gas scheduling and storage.

Read more: Allegro enhances functionality for Nat Gas trading & logistics

BNP Paribas Commodity Futures Inc.: Green Exchange’s First Clearing Member

London, 10 August 2010

BNP Paribas Commodity Futures Inc, a global futures commission merchant and part of the BNP Paribas group, today became the first Green Exchange LLC (Green Exchange) clearing member, enabling them to clear customer business upon the launch of the new Exchange.

Read more: BNP Paribas Commodity Futures Inc.: Green Exchange’s First Clearing Member