MF Global weekly CDM & VER Market Summary 15th - 21st June 2009

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VER trading activity was rampant last week with several large tenders circulating the market. Increased pressure on pricing due to an oversupply of projects drove the value of recent vintage issued Chinese and Indian RE VCUs to sub $3 levels, with non RE credits trading at sub $2. ‘Exotic’ non-US RE VCUs are holding at around $4.25. Demand for all types of US credits continues to expand. US VCS and CAR CRT offsets are being eyed for pre compliance with 5 year forward strips of methane projects dominating buyer mandates. Issued OTC CRTs are $6/$7 with forward strips $5.50/$6.50 bid/offered. The Dec 2009 CCX traded CRT contract settled at $5.05 Friday down from $5.90 last week.  The 2009/2018 10 year strip settled at $5.56 down dramatically from $6.94 with minimal volume traded. US VCUs are $4/5 bid/offered. Gold Standardprice levels remain stagnant at €7/8 for issued and €5/6 for forward credits

The Dec 09 secondary CER contract closed the week up €0.21 at €11.41 despite losses on stock markets. Data showing higher than expected unemployment led to concerns of a prolonged recession.

CCX CFIs remained under pressure. The Dec09 contract settled at $0.95, down $0.20 from last Friday’s $1.15 settlement. Persistent uncertainty over the US Waxman/Markey Climate bill relating to which methodologies will be considered in the US program coupled with questions regarding early action continue to weigh on prices. Total volume of 237,000 tonnes exchanged hands over the week down from 791,600 tonnes from 8th - 12th June.

30,887,620 2009 RGGI allowances sold for $3.23 at last week’s auction. Price levels were 8.6% below the March auction with 54 entities (85% of them compliance buyers) participating.  110 million allowances have been auctioned since the start of the scheme. RGGI futures traded as low as $3.10 on exchange Friday in response to the weaker than expected auction price announcement but recovered to $3.24 at CCX close. 2012 vintage allowances sold for $2.06 at the auction.

The US house energy committee chaired by Henry Waxman stated it was unlikely farmers would receive direct payment from the government for GHG reduction efforts and that a soil sequestration land stewardship program would be created. The decision enforced distrust in the farming community of EPA’s role in the carbon reduction scheme with lawmakers skeptical that the Agriculture department has the capability to oversee offset programs. The bill aimed at reducing GHG farming emissions 17% from 2005 levels by 2020 is unlikely to be voted on in the house by the end of June.

Japan aims to generate 40% of its electricity from nuclear power by 2020. The target came a fortnight after announcing GHG reduction limits of 15% below 2005 levels by 2020. The economy ministry wants to improve nuclear efficiency by 20% while increasing output which will require the construction of 8 new power stations over a decade. In 2007 Japan generated 25% of its power from atomic energy but an earthquake at the Kashiwazaki-Kariwa put the plant offline for two years.

Australia’s government last week outlined draft regulations for the CPRS trading scheme despite delays to renewable energy laws. Penny Wong stated the government is taking extra steps to disclose all information available to aid decisions for CPRS. Emission intensive industries such as those producing carbon black, newsprint, silicon and bulk flat glass will receive up to 94.5% of allowances with medium emitters receiving up to 66% of permits for free. The Labour government is 7 votes short in the Senate with voting on renewable energy legislation a likely pre warning to emissions laws. The renewable bill promoting $22 billion of investment was delayed by the senate until August. The scheme will impose a 20% renewable energy target by 2020 for the coal intensive country, an increase of 13.5% on current levels. The delay impacts on a government promise to provide rebates for individuals who installed solar power in their homes.

Deutsche Bank lit up a 50 foot high carbon counter, in New York City last week, which reports real time CO2 released into the atmosphere. The sign, intended to draw attention to the seriousness of climate change, suggests the current quantity of CO2 in the atmosphere is 3.64 trillion tons (and counting), the highest level in 800,000 years and is increasing 800 tons a second.

Brazil launched the Green Arch initiative late last week which aims to reduce emissions from deforestation and degradation (REDD). The government, under pressure from environmental groups, will pay small farmers $51 per month to plant trees in deforested areas of the Amazon to promote an alternative to timber exploitation for poor communities. Deforestation accounts for 20% of global GHG emissions with REDD allowing wealthy nations to reduce emissions by paying poor countries to protect forests. Top retailers last week banned the purchase of meat from deforested areas subject to reports showing that beef was the largest driver of Amazon deforestation.

VER Statistics *NEW!
Source: APX; CCX; CAR; TZ1

APX GS Registry: 102 (+0) Projects Listed
APX VCS 32 (+4) Projects with Issued VCUs
CCX CFI weekly volume 237,000Mt (+554,600Mt)
Climate Action Reserve 42 Projects Listed (7 Issued)
TZ1 VER Registry 38 VCS (+5) Public View Projects

CDM Statistics
Source: UNFCCC

Total Issued CERs: 297.9Mt              Issuances: 1133
Total CERs Requested: 7.27Mt        Host countries: 55
Registered Projects: 1677               Requests: 80

Russia plan to cut emissions by 10 – 15% by 2020 but did not detail a baseline. President Medvedev stated that if achieved the country would have reduced emissions by 30 billion tonnes since 1990 but would not sacrifice future economic growth. Russia in 2007 was already 34% below 1990 levels due largely to the closure of energy intensive industries in the post Soviet era. To date Russia had been the only country not to announce a target post 2012 but is likely to announce a 2020 by July according to the UN.

To request live project pricing information or to discuss any of the above, please contact Grattan MacGiffin or Gareth Turner in London on +44 20 7144 5780; Mary Haskins in New York or Akshat Jaswal in Singapore

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