MF Global Weekly CDM & VER Market Summary 24th – 30th August 2009

US CAR CRT demand is growing with multi-year strips within 2009–2016 trading at between $7/$8. As the CAR seeks to broaden its range of methodologies and enlarge supply so as to deepen liquidity and dominate the US market, the following are under consideration: Coal Mine Methane, Organic Waste Digestion, Ozone Depleting Substances and N2O from Nitric Acid Plants. On exchange, the CCX CAR-CRT Futures DEC 10 non-vintage specific strip settled at $4.25 while the CCX CAR-CRT Dec10-Dec15 vintage 09 strip settled at $6.57, both with no volume posted.

African VCUs remain the ‘must have’ in the VER market despite a wide spread of $5/$15 bid/offered for issued due to miniscule supply. Also sought after are small clips of additional exotic recent-vintage RE offsets trading at around $4/5 bid/offered. Forestry projects of all methodologies continue to garner interest but are also suffering from a wide spread of $4/$10 bid/offered. Otherwise the market is flat with VCUs trading around $2.50-$3.

Gold Standard trading is quiet with location determining pricing and a bias away from Turkish wind. RE credits from New Zealand are trading at around €6 while at the other end of the market African projects in early development are attracting bids of €8-11.

The Dec09 CCX CFI closed the week at $0.20 cents with a meager 19,100 total tonnes traded on-exchange.

Privately negotiated CFI deals once again outshone on-exchange volumes:

4,900 tonnes US Ag Soil Carbon traded $2.00
50,000 tonnes US LFG Methane traded $0.65
3,900 tonnes German CMM traded $0.25
600 tonnes US Forestry traded $2.00

The Dec09 secondary CER contract moved sideways throughout the week settling at €13.35. Volumes were thin despite a weaker energy complex driving a year low UK fuel switch level.

The US Waxman–Markey bill steering committee has delayed the draft release until late September from the original date of 8^th September. Delays on the healthcare bill, the death of Senator Edward Kennedy and hip surgery for foreign relations committee chair Senator Kerry have forced the timeline revision. The House narrowly passed the bill in June and the Democrats are racing against a December deadline for Global climate talks.

Germany will provide Ecuador with $650 million over the next 13 years to aid adaptation to a low carbon economy through avoided deforestation and the prevention of oil extraction. Ecuador must raise $310 million by 2011 to keep oil rigs from drilling Yasuni national park believed to contain 20% of the country’s reserves. The government believes a     minimum investment of $3.6 billion is needed to protect the area permanently, 50% less than the state would receive from drilling permits. UK, Italy, Norway and Sweden have pledged to contribute to the fund but have made no firm pledges. Ecuador’s scheme does not qualify to generate Kyoto credits but can produce voluntary offsets which may be eligible for future compliance.

The Swiss government last week proposed a 20% reduction in GHG emissions from 1990 levels by 2020. The climate bill amendment enforceable from 2012 is in keeping with EU proposals, despite the nation’s non-membership of the EU. The Swiss government vowed to make further cuts if a global climate deal is agreed at Copenhagen but does not range as far as public referendum demands for a minimum 30% reduction. Additional measures to achieve the targets include a mandatory 25% footprint investment in projects for all importers and producers of fossil fuels, 200 CHF million budget to improve building efficiency while supporting investment in renewable energy and improvements to the country’s ETS scheme.

Indian Prime Minister Manmohan Singh approved national energy efficiency plans which will put in place a trading scheme creating a potential market of $15 billion by 2015. The proposal is part of a drive to shift to a low carbon economy where businesses using surplus energy will purchase efficiency certificates from those consuming less energy in line with industry sector benchmarks. The government stated the scheme would save 5% of India’s total energy consumption and reduce emissions by 100 million tones per annum from a current total of 3 billion tones annually. In conjunction funds will be assembled to provide banks with guarantees for loans for energy efficiency projects, and support investment in energy efficient products and services.

Brazil’s fossil fuel carbon emissions rose 49% from 1994 to 2007 according to a study commissioned for the Environment ministry. The energy, industrial and transport sectors now account for 30% of the country’s GHG emissions as opposed to 18% in 1994 though data suggests that deforestation and land use change play a lesser role than expected. Carbon intensity increased in electricity generation to 54 tonnes per GWh from 42 tonnes per GWh in 1994 due to the greater use of gas, coal and oil. Deforestation and agriculture are expected to account for around 35% of total emissions meaning that REDD efforts must be teamed-up with other initiatives to curb emissions growth. The report is to be published by 2010 and is the first assessment and submission to the UN of Brazil’s carbon emissions.

Dominion, a large Virginia based utility has applied for federal assistance of close to $300 million for its carbon capture and storage project. Dominion expects construction of the CCS plant could be completed by 2015.

VER Statistics
Source: APX; CCX; CAR; Markit

APX GS Registry: 117 (+0) Projects Listed
APX VCS 46 (+1) Projects with Issued VCUs
Markit VCS Registry 46 VCS (+2) Public View Projects
CCX CFI weekly volume 19.1kt (-170,400kt)
CAR: 61 (+5) Projects Listed; 1.62Mt CRT issued

CDM Statistics
Source: UNFCCC

Total Issued CERs: 325.7Mt            Issuances: 1233
Total CERs Requested: 4.01Mt       Host countries: 57
Registered Projects: 1792 (+10)      Requests: 111

China passed a resolution on Thursday stating the country will strive to reduce emissions and promote a low carbon economy. The standing committee of the National People’s Congress laid out the terms 100 days ahead of UN climate talks in Copenhagen. China is the world’s largest emitter of GHGs but per capita emissions are still much lower than developed nation levels. Terms include the drafting of future climate legislation, the promotion of renewable energy and energy efficiency while warning against international trade tariffs. NPC resolutions are not legally binding but do influence decision making.

A survey conducted in August by the Washington Post-ABC News, concluded that 55% of Americans approve of Obama’s energy policy (while 30% disapprove). The poll of 1,001 adults showed the majority supported cap and trade legislation and assumed the proposed changes would increase energy costs. The majority of those polled agreed the changes would address climate change. A majority of 91% support increased wind and solar power.

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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Posted on September 1, 2009 · in CDM & VER Market Summary