Weekly CDM and VER market summary 14-21 September 2009

The US is currently dominating trading activity in the global voluntary carbon market. While the rest of world endures a slowdown, strong demand for CRTs as well as persistent volumes on CCX coupled with a growing stream of privately negotiated transactions are eclipsing activity in Europe and elsewhere.

CRTs remain highly sought after with prices varying depending on methodology type and proximity to issuance. 2009+ vintage credits are preferred with 09-13 strips the most common. A shortage of supply is causing projects to be contracted at earlier stages, nearer the bottom of the emerging $6-$10 spread. Increased methodologies and locations are expected to help satisfy demand in the mid-term but shortage of supply is expected to persist for 2009.

Charismatic pre-CDM VCUs are still priced $4/5 bid/offered with cheap Chinese VCUs offered around $2 at the other end of the spectrum. Demand is still small as offset retailers watch the market.

US VCUs, offered at $5.50 are still priced at a premium reflecting limited supply and increasing demand while Gold Standard credits remain on the shelf as two new Turkish projects were added to the GS Registry.

Trading on CCX was slim for the week with 215 CFIs (21,500 tonnes) transacted. CCX CFI prices were unchanged on the week, with Dec09 CFIs ending Friday's session at $0.20. There was only one "privately negotiated transaction " listed on the CX this week, for 200 tonnes of 2008 vintage USA Forestry Offsets at $0.20/t, temporarily bucking the recent trend of PNT activity being greater than on-exchange.

The Dec 09 secondary CER contract closed the week down €0.45 at €12.45.

Chu warns against deep US cuts

At a press briefing in Vienna last week, US Energy Secretary Steven Chu suggested 30 to 40 per cent cuts in emissions by 2020 might be too ambitious to get through the US Senate. He emphasized that develop nations need to get realistic goals and involve as many nations as possible.

A bi-partisan panel on the Senate energy committee expressed concern over the lack of price floors and ceilings in the House Waxman-Markey cap and trade carbon bill. Fearing excessive speculation and other manipulative practices in a carbon trading scheme, the Senators felt that the proposed protections were not enough.

The mooted protections include a $10 dollar floor designed to keep prices from going too low and a $28 dollar ceiling that would trigger an auction of allowances held in reserve to keep prices from going too high. Nevertheless, it is encouraging that debate on finalising the carbon bill is ongoing though many expect the healthcare bill to derail any short-term schedule.

Arnie approves Cali renewables target

California governor Arnold Schwarzenegger passed an executive order early last week which will ensure a third of the state's electricity will come from renewable sources by 2020. The governor superseded the legislature's plan which although having the same 33 per cent renewable target, did not allow power firms to allocate electricity from outside of California.

Schwarzenegger stated the plan would help the state better meet its needs by importing power while preventing extra regulatory requirements for the construction of solar thermal plants. California aims to reduce emissions to 1990 levels by 2020 and the state's Air Resources Board will now develop and implement guidelines by mid 2010.

EPA announces fuel efficiency standards

The US EPA released its new vehicle standards on Wednesday, requiring cars and light trucks to average 35.5 mpg by 2016. The standards are expected to be met by improving transmissions, tires and engine efficiency. The plan expects to cut GHGs by 950 million tonnes reducing GHG emissions by 21 per cent. The EPA provides the public a 60 day comment period.

HFC agreement reached

The US, Canada and Mexico have agreed to include HFCs in the Montreal Protocol to protect the ozone layer.

HFCs have a high global warming potential consisting of industrial gases used in refrigerators and air conditioning which the Environmental Investigation Agency predicts will account for 40 per cent of world GHGs by 2040 if unchecked. HFCs are covered under the six greenhouse gases included in the Kyoto agreement and final provisions will be concluded in Egypt in November.

VER Statistics

APX GS Registry: 122 (+2) Projects Listed
APX VCS: 69 Projects with Issued VCUs
Markit VCS Registry: 51 VCS (+1) Public View Projects
CCX CFI weekly volume: 215kt (-261.1kt)
CAR: 66 (+0) Projects Listed; 1.62Mt CRT issued

Source: APX; CCX; CAR; Markit

CDM Statistics

Total Issued CERs: 330.6Mt Issuances: 1,263
Total CERs Requested: 4.1Mt Host countries: 58
Registered Projects: 1,822 (+13) Requests: 67

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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