Weekly CDM and VER market summary - 10-16 August 2009

Trading activity in the VER market remains slim and continues to be dominated by demand for offbeat projects with non-typical locations and methodologies. Gold Standard credits are priced around €6-€10 with African offsets commanding the highest values.

Uncertainty over domestic legislation in the US and Australia combined with a slower growth in demand for new offsets and an abundant supply of Chinese and Indian VERs in particular has reduced prices and stalled trading.

VCU demand for exotic recent vintage RE projects persist at around $4 with non-RE VCUs priced around $2.25. In contrast, the US CAR CRT market is expanding, with increasing issuances combined with a growing number of participants joining on a weekly basis. Demand remains for 5-year strips, from 2009 onward currently trading at around $7 levels with Ag- methane credits commanding a $0.50cent premium.

On exchange, the CCX CCAR-CRT Futures DEC 10 year non-vintage specific strip settled at $4.95, down $0.02 in the week. While the CCX CCAR-CRT Dec10-Dec15 strip settled at $6.74, unchanged over the previous weeks close.

CCX CFIs plumbed new lows this week with the Dec09 CFI falling from $0.35 to settle at $0.25 on Friday August 14th. Total exchange traded volume was a minor 59,000 tonnes.

Privately negotiated CFI deals for the week:
93,200 tonnes Ag Methane traded $0 .95
57,100 tonnes 2009 Ag Methane traded $2.75
100,000 tonnes Landfill Methane traded $0.70
2,200 tonnes Indian Wind traded $0.41
2,000 tonnes US Forestry traded $1.50

The Dec09 secondary CER contract moved sideways last week remaining at €12.70, despite improved economic growth in Germany and France. The supply of primary CERs to the market has slowed considerably as project developers are electing to not commercialise their credits and are instead holding on to them. Uncertainty over post-Kyoto eligibility and the withdrawal of project finance by many buyers has also contributed to this trend.

Australia votes down climate bill

Australia's opposition coalition voted down the governments CPRS climate change bill on Thursday. All non-Labour party senators, consisting of the Conservatives supported by the Greens and independents, rejected the bill in the Senate.

After an interval of three months the legislation will go to a vote for the second and final time with Prime Minister Rudd ruling out an early election, despite data showing Labour ahead in the polls. Climate change minister Penny Wong vowed to push through the scheme before talks in Copenhagen in December as a failure to do so would leave the country with no negotiating position at global talks.

The Greens, who control five crucial swing votes in the Senate, have pledged support for future bills if the government imposes tougher emissions targets and invests in renewable energy. The Conservatives are divided on the need for a scheme: most want it delayed until after global talks as they fear domestic industry will be disadvantaged.

Conversely, a vote on widely supported renewable energy laws driving a 20 per cent energy target are expected imminently and will unlock over A$20 billion of investment. This had led to calls from opposition to decouple the renewable laws from the cap-and-trade framework. Australia's CPRS is similar to the European ETS and would require the top 1,000 polluters to purchase allowances covering 75 per cent of national emissions.

US predicts drop in energy emissions

The US Energy Information Administration (EIA) has projected a five per cent reduction in GHG emissions from the US energy sector in 2009. The economic downturn combined with fuel switching from coal to natural gas for electricity generation is behind the projection although it is widely expected to be reflected by higher prices in 2010.

The electricity sector's global coal consumption is predicted to fall shy of a billion tons, for the first time since 2002, while petroleum emissions are expected to fall four per cent in 2009 due to reduced transport consumption.

Energy related emissions account for 80 per cent of domestic GHGs, jumping 16 per cent from 1990 to 2008. Despite the drop, the US remains the highest per capita CO2 polluter and second largest overall emitter behind China. It is the first time the EIA, which is the statistics arm of the government, has analysed data from coal, natural gas and petroleum in its regular energy reports.

US, Canada and Mexico ink climate pact

The North American triumvirate last week signed a declaration on climate change and clean energy. US President Obama, Mexican President Calderon and Canadian Prime Minister Harper affirmed commitments to limit global temperature rises to two Degrees; to reduce global emissions by 50 per cent below 1990 levels by 2050 and for cooperation in future cap-and-trade schemes.

The leaders also backed Mexico's proposal for a Green Fund, in which rich and poor countries provide finance to help developing countries adapt to climate change.

The declaration commits the partners to develop "comparable approaches" to emission reductions, construct a North American smart grid for electricity and create an aligned framework for energy efficiency standards. The parties will also work to phase out the use of HFCs, promote best practice to reduce emissions from the oil and gas sector and champion the development of sustainable forestry.

VER Statistics

APX GS Registry: 114 (+3) Projects Listed
APX VCS: 43 (+2) Projects with Issued VCUs
Markit VCS Registry: 44 VCS (+0) Public View Projects
CCX CFI weekly volume: 59kt (-340,200kt)
CAR: 53 (-3) Projects Listed; 1.62Mt CRT issued

Source: APX; CCX; CAR; Markit

CDM Statistics

Total Issued CERs: 318.12Mt Issuances: 1,207
Total CERs Requested: 7.4Mt Host countries: 57
Registered Projects: 1,765 (+10) Requests: 112

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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