MF Global Weekly CDM & VER Market Summary 3rd - 10th May 2009

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By Gareth Turner 11 May 2009

VER pricing is holding at around the $5.25 level for recent vintage issued RE VCU’s. Project location now dominates buyer demand specification in divergence to volume size, with SE Asian and South American VERs the offsets of choice. Interest in CAR CRT credits is growing despite the limited number of methodologies available, currently $7/8 bid/offered. Efficient issuance and project processing are driving positive sentiment with counterparties confident the American market will improve carbon liquidity previously hampered by EB & DOE delays.

Gold Standard interest remains inconsistent despite competitive pricing with issued credits €8/9 bid/offered. Unrelenting buyer focus persists around non typical methodologies and locations.

The CCX CFI continued its downward spiral in both pricing and volume. 175,100 tonnes were traded, 41,800 tonnes less than the previous week with the spread focusing on older vintages. The CFI 09 contract closed down $0.15 at $1.40.

The Dec 09 secondary CER contract closed the week up €1.05 at €12.55 on the back of rising energy and oil prices. Better than expected US job data spurred the market while an escalating UK summer 2010 coal – gas fuel switch value drove carbon higher.

US President Obama’s $3.55 trillion budget released Thursday, allocated up to $1.2 billion to help developing countries adapt to climate change while retaining 100% permit auctioning. $280 million of funding would be specifically channelled into adaptation programmes aligned to the UN Global Environmental Facility’s Least Developed Country scheme. $500 million would be provided for the World Bank’s Clean Technology Fund (CTF) and a further $80 million for its strategic clean investment fund. The 2010 budget also includes $160 million for forestry and land use incorporating $120 million for bilateral and regional development for vulnerable countries and $20 million for use through the Tropical Forest Conservation Act. In contrast the administration maintained the full auctioning of allowances expected to create $646 billion in revenue. Companies emitting excess GHGs over a specified cap would be required to buy emission credits from compliant firms. The investments represent an eightfold increase in funding and reflect the US commitment to help the world’s most vulnerable countries adapt to climate change according to Todd Stern, US special climate envoy. The administration are aiming to pass a cap and trade bill by May but opponents fear heavy auctioning would put pressure on industry already reeling from economic recession.

Indonesia on 8th May became the first nation to formalise regulations and guidelines for UN approved credits relating to reducing emissions from deforestation and degradation (REDD). REDD projects aim to create revenue for developing nations by ensuring the long term protection of forests and the rehabilitation of land. Indonesian rules state foreign and local counterparts can jointly develop projects while outlining the types of forests, licensing requirements and a 30 year validity period all of which will be verified by a newly appointed national REDD commission. However the Indonesian finance ministry did not provide clarity on the government share of revenue. REDD projects will operate in the voluntary market until their likely inclusion in new climate change legislation, provisions are included in both a post 2012 Kyoto agreement and the Waxman-Markey US federal cap and trade scheme.

The Environmental Protection Agency (EPA) announced its $10.5 billion 2010 budget late last week which included allocations of $17 million for the development of a US GHG registry and $5 million for the development of protocols and methodologies for domestic and international offsets. Funding will also be used for data reporting and measurement technologies with finalised registry proposals expected by the end of 2009. In March, provisions were unveiled for 13,000 installations emitting more than 25,000 tonnes of CO2 to report emissions which according to EPA account for up to 90% of US GHG’s. The proposals are a major step toward carbon emission regulation with EPA expected to take the lead under the clean air act if the Waxman-Markey federal cap and trade scheme fails to pass into law.

The UK government has proposed the introduction of power meters for all UK homes by 2020 projected to save an estimated 2.6 million tonnes of CO2 per year. The UK last month committed to binding emission reduction targets of 34% below 1990 levels by 2020. Meters will be installed and run by power companies and monitored by a third party. In 2007 The UK achieved reductions of 21.7% below 1990 levels.

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

APX GS Registry: 95 Projects Listed
APX VCS 21 (+3) Projects with Issued VCUs
CCX CFI Volume traded in the week 175.1kt (-41.8kt)
Climate Action Reserve 36 Projects Listed (6 Issued)
TZ1 VER Registry 19 VCS (+7) Public View Projects

CDM Statistics
Source: UNFCCC

Total Issued CERs: 285.8Mt Issuances: 1076
Total CERs Requested: 2.141Mt Host countries: 55
Registered Projects: 1613 Requests: 85

New Zealand’s government is to implement changes to emissions law by end of the year following recommendations from an ETS review committee. Submissions include the necessity for a domestic scheme to have uniformity with an Australian framework. Australia has delayed its ETS until July 2011 with a first year fixed allowance price of A$10. New Zealand’s ETS implementation has been at a standstill since National party victory in November 2008 with business competitiveness the main driver for reform. Latest figures suggest the country has an emissions credit of NZ$241 million with emissions averaging 23 million tones per annum due to drought and improved reporting on forestry carbon storage.

To request live project pricing information or to discuss any of the above, please contact Gareth Turner [email protected] or Grattan MacGiffin [email protected] in London on +4420 7144 5780; Mary Haskins in New York [email protected] or Akshat Jaswal in Singapore [email protected]

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