Weekly CDM and VER market summary 26-30 October 2009

The fledgling recovery in the Voluntary markets has continued with increased levels of deal activity. Prices have largely remained unchanged from the previous week, with exotic VCUs at $4/5.50 bid/offered at the upper end of the scale while pure-VCUs trundle along at low-$2 levels. US VCUs are offered at around $5.50 with slightly improved supply exerting downward pricing pressure.

CRTs are ever-popular though demand exceeds supply, forcing buyers to consider PIN stage investments in order to secure supply, similar to the primary CDM market. "Carrots" are $7-8 bid/offered for 2009+ vintages.

Gold Standard VER prices are unchanged with spot credits at €7 and forwards €5-6 bid/offered. Activity is increasing slowly, albeit from a very quiet base. There is bid interest for small volumes of African credits, paying €3 premiums however supply is majorly constrained.

The Dec09 CCX CFI closed at 10 cents, unchanged on the week. Large volumes exchanged this week although prices remained virtually unchanged. A total of 1,419,200 tonnes traded. Specs giving up on long term positions were responsible for the sales while bottom pickers took advantage of the low price to accumulate credits they hope will ultimately be worth more than 10 cents.

No Privately Negotiated Transactions have been reported this week (as of 10/29/09).

The Dec 09 secondary CER contract settled up €0.30 from last Friday's close around €13.15, up €0.70c on the week.

Carbon rose early in the week tracking the upward trend in crude oil, but slid later amid weakening German power pricing and buyer caution.

Senate climate bill work to get underway

Senate Environment and Public Works Committee Chair, Barbara Boxer said late on Thursday that she wants to hold drafting sessions as early as Tuesday on the climate change bill pending before her committee, however the meetings
could be delayed by Republican stalling tactics.

Ranking Republicans (on the panel) have indicated they may lean towards a boycott of the week's work sessions, citing a need for further analysis of the legislation from the EPA. Republicans have voiced concern that the bill favours certain regions of the country over others and they deny claims the bill will create millions of alternative energy jobs.

EPA Administrator, Lisa Jackson told the committee on Tuesday that her agency relied heavily on its economic analysis of the House-passed version of the bill in writing its analysis of the Boxer-Kerry Senate bill. Jackson said they were similar enough not to require a repeat of the full analysis that Republicans are requesting and which would take a number of weeks to complete.

JP Morgan snaps up EcoSecurities

JP Morgan appears to have virtually completed its purchase of Ecosecurities after taking over 80 per cent of the stock. This would be the bank's second carbon acquisition following the successful integration of Climate Care, who like
Ecosecurities are also based in Oxford.

EU proposes van emission standards

Tougher EU emissions standards for light commercial vehicles of 175g/km are to be phased in from 2014 to 2016.

Legislation aims for a long-term commitment of 135g/km by 2020 with limits set by weight of vehicle. Manufacturers that miss targets will face rising penalty charges. The proposal is designed to align the 27 nation bloc's CO2 emission vehicle performance standards.

Australian climate bill on a knife edge

Australia's CPRS climate legislation is once again under threat. The opposition Liberal Senate leader Nick Minchin stated that "even if the government accepts all our amendments, we may still vote against the bill or seek to defer it".

However Liberal party leader Malcolm Turnbull is keen to come to an agreement on cap-and-trade to avoid a general election which may hand the Labor government a clear majority in both houses of parliament. Industries have reacted angrily to the Liberal voting position with uncertainty over the past few months crippling trading. A vote is due on CPRS before the end of November.

Canada warns it needs access to offsets

Canadian emitters will not be able to meet their emissions reduction targets without the ability to use international offsets. Speaking at an industry event in DC this week, regulatory affairs manager of Royal Dutch Shell, Gerry Ertel said "Canada does not have enough domestic offsets making international offsets in a compliance program necessary".

Last June the Canadian government released their offsets guidelines saying only offsets from Canadian projects started after Jan 2006 could be used. Canadian regulations are currently stalled however as the government has been waiting for the US to pass its legislation before they move their own forward.

Japan's emissions fall

Japan's fossil fuel-related CO2 emissions decreased by 6.7 per cent in FY 08/09. This reduction has been attributed to weaker energy demand and improved energy efficiency. Japan is still far from achieving its Kyoto target of a six per cent
reduction from 1990 levels by 2012.

SEC rule could usher in climate risk reporting

US traded companies may have to disclose their exposure to financial risks relating to climate change and emerging policies under a new SEC rule. The new SEC guidance comes on the heels of a series of lawsuits against emissions intensive
companies demanding that they reveal the potential impact of climate policies on their operations.

EU agrees climate aid deal

EU leaders on Friday reached agreement on an international climate adaptation fund for developing nations. The bloc agreed that €100 billion would be required by developing nations per year by 2020 and that up to half of this would be req uired from rich country governments.

Allocations from individual EU member states have yet to be agreed and are proving contentious. Funding remains a core issue in determining wider agreement at the Copenhagen climate talks.

Singapore to trade CERs

SMX, the Singapore exchange scheduled to open this December has declared its intention to trade CERs, and consider VERs, from local projects and possibly in local currencies.

VER Statistics

APX GS Registry: 127 Projects Listed
APX VCS Registry: 79 Projects with Issued VCUs
Markit VCS Registry: 63 VCS Projects on Public View
CCX CFI weekly volume: 1.42Mt *29/10/09 closing data
CAR 73 Projects Listed; 1.68Mt CRT issued

Source: APX; CCX; CAR; Markit

CDM Statistics
Total Issued CERs: 340.5
Total CERs Requested: 12.2Mt
Issuances: 1,326
Host Countries: 58
Registered Projects: 1,873

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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