Weekly CDM and VER market summary - 3-9 August 2009

The Dec09 secondary CER contract finished up €0.40 at €12.70 with carbon largely unchanged and said to be tracking stagnant oil prices. Volumes were extremely thin last week in the expected summer slowdown while better than expected US unemployment figures helped ease concern. Primary CER supply is thin as project developers elect to hold onto their credits amid depressed prices.

There has been a small increase in demand for small clips of recent-vintage VCUs with delivery registry in the market. Renewable Energy VCUs are $2.50/$4.00 bid/offered with Energy Efficiency credits $2/$3. However exotic project location and methodology remains the preference of Buyers, with these VCUs bid $1-1.50 higher. Gold Standard spot VERs are around €8-€9.

Demand for US CAR CRTs remains high despite limited of supply of credits. This is forcing buyers to look at purchasing projects at the early development stage, with prices moving higher at $7/8.50 bid/offered.

CFIs continue to lose ground as sellers outstrip buyers in a well supplied but ill-defined marketplace. Questions surrounding climate change policy continue to be the wildcard.

The price of Dec09 CFIs fell from $0.45 to $0.35 cents over the week ending Friday August 7. Total CFI volume was a light, 399,200 tonnes. The CCX CCAR-CRT Futures 10 year non vintage specific strip settled at $4.94; the CCX CCAR-CRT Dec10-Dec15 vintage 09 strip settled at $6.74.

Effective Friday, July 31, 2009, CCFE (Chicago Climate Futures Exchange) listed vintage specific CCAR-CRT futures contracts. In addition, quarterly expirations were also introduced to the current non-vintage specific CCAR-CRT futures contracts. As of August 3, 2009, the CCX will report the quantity, price, vintage and methodology of privately negotiated CFI transactions.

Privately negotiated CFI deals for the week:
40,000 tonnes Ag Soil Carbon traded $1.00
50,000 tonnes LFG traded $1.00
58,200 tonnes Coal Mine Methane $0.90

Senate considers carbon price caps

The inclusion of price caps as a means to reaching a timely consensus on the proposed Waxman-Markey draft is said to be under consideration in the US Senate. This would be seen by some as a further dilution of the original, tougher measures but a possible consequence of the compromises the bill will require in order to become legislation.

NZ outlines emissions target

New Zealand pledged to cut GHG emissions 10 to 20 per cent below 1990 levels by 2020. The Ministry of Environment committed to a 10 per cent mandatory reduction regardless of the outcome of international climate talks and will increase the target by up to 20 per cent if a global climate change agreement is achieved in Copenhagen. Any post Kyoto target would have to include limiting global temperature increases by 2 degrees Centigrade with developing nations China, India and Brazil also committing to action. New Zealand's Kyoto target requires the country to hold GHG levels at 1990 levels between 2008–2012, and it is on track to meet its goal.

India mulls solar plan

India is considering a radical investment into solar generation, with proposed targets of 20GW by 2020 leading to 200GW of electricity being generated by the sun, by the middle of the century. Rich in coal, India is a large importer of oil and natural gas; large-scale generation of domestic power would also help defend India’s green credentials in future climate change negotiations.

US climate bill vote expected late September

As the US Senate prepares for August recess (August 10), the future of a federal cap-and-trade scheme remains undefined and most likely will not be seriously addressed until late September. Senator Harry Reid has requested that the five committees working on the climate change bill complete their sections of the bill by the September 28th deadline.

In the meantime, the oil industry has voiced its opposition to Waxman-Markey based on EIA data released last week that suggest gas prices could rise by as much as 30 per cent by 2030. The American Petroleum Association states cap-and-trade penalises the oil industry by awarding it only a small portion of allowances (2.25 per cent) for free as compared to other industries, forcing refining to migrate overseas without in fact reducing emissions.

Concern that climate change legislation would encourage industry to move oversees inspired Senators from industrial states to send a letter to the White House last week requesting tariffs be a part of legislation. Major trading partners of the US (namely China and India) have expressed their opposition to such a tax suggesting developed nations like the US are responsible for the majority of GHGs already in the air.

Australian opposition proposes watered down climate bill

Australia's opposition have published a more business friendly and less rigorous carbon emissions bill in advance of an expected veto of the government's legislation. Thursday's vote will likely trigger an early election if it goes against the government who are seven votes shy of a majority.

The opposition, who are wavering in the polls, proposed a binding GHG reduction target of 10 per cent by 2020 based on 2000 levels, compared with the government's CRPS which would limit emissions by between 5 and 25 per cent.

The opposition plan would allocate 100 per cent free permits to coal and other major export industries compared to 95 per cent under CRPS. Only 30 per cent of Australian carbon permits would be auctioned as opposed to the governments 70 per cent.

Australia's CPRS is scheduled to begin in July 2011 with Climate Change Minister Penny Wong dismissing the opposition’s proposals as a "rehash of the failed Canadian experiment". The country is the world's largest coal exporter and one of the largest per capita emitters due to an 80 per cent reliance on its coal for electricity generation.

New York sets 2050 emission goal

New York State's Governor David Paterson signed an executive order last week to reduce New York's GHG emissions 80 per cent below 1990 levels by 2050. New York State, a participating member of RGGI, is committed to reducing power sector emissions at current levels and will reduce them a further 10 per cent by 2018. A new Climate Action Council has been formed to initiate and oversee the plan.

VER Statistics

APX GS Registry: 111 (+0) Projects Listed
APX VCS: 41 (+0) Projects with Issued VCUs
TZ1 VER Registry: 44 VCS (+0) Public View Projects
CCX CFI weekly volume: 399.2kt (+216.4kt)
CAR: 56 (+1) Projects Listed; 1.6Mt CRT issued

Source: APX; CCX; CAR; TZ1

CDM Statistics

Total Issued CERs: 316.8Mt Issuances: 1,196
Total CERs Requested: 5.7Mt Host countries: 57
Registered Projects: 1,755 (+5) Requests: 100

Source: UNFCCC

This report was provided by MF Global, a leading broker in exchange-traded futures and options

For more details on the company's carbon market activities contact Gareth Turner at gturner@mfglobal.com

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