VER trading activity for pre-CDM credits slowed last week while the market for US-originated credits continued to build. The proposed delays to the legislative passage of the Waxman-Markey bill did nothing to abate interest for Climate Action Reserve "carrots" with a lack of projects pushing-up demand for future vintages in anticipation of being eligible for future compliance purposes.
Prices of OTC CRTs remains at $7-8 for projects in early development and closer to $9 for those nearing registration; there is a $1 premium increment along the curve, with pricing in contango. US VCS offsets are holding at around $5. Trading of CAR CRTs on CCFE remained stagnant with no volumes recorded during the week, maintaining the Dec 2009/18 year strip at $5.64.
Despite a quieter week, demand continues to focus on recent vintage, issued RE VCUs from SE Asia, South America and Africa at $4.50 levels. Standard non RE pre-CDM projects from China, India and Turkey are trading lower, at around $3/3.50. Gold Standard bid interest is preferring non-typical locations like Africa. Small clips of such projects early in the life cycle are being priced at €7–10 compared with €8-9 for issued credits from China and India.
The CCX CFI Dec 2009 contract closed down $0.30 returning to record lows of $0.60 from $0.90 the previous week. A considerable 2,231,900 tonnes traded over the week, mainly in the newer 2006-09 vintages and with 1.4 million tonnes exchanged alone on Thursday.
The Dec 09 secondary CER contract closed the week up around €0.13 at €12.08 corresponding to strong German power prices. Market optimism following government carbon reduction commitments led to oversubscription in the UK EUA auction contributing to a widening of the EUA–CER spread.
US climate bill faces delays
US climate bill amendments have been delayed until September by the Senate committee. Environment committee chairwoman, Barbara Boxer had hoped to speed passage of the Climate Act after the House of Representatives approved the bill last month.
However drafting, debate and voting on the legislation will be delayed after Senate majority leader Harry Reid extended deadlines to 28 September for various committees to complete sections of the bill. President Obama had called for legislation to be passed in time for UN negotiations in Copenhagen in December but timescales will now be difficult to achieve.
Aviation carbon reporting deadlines pushed back
EU aviation reporting deadlines scheduled to begin 31 August have been delayed due to disputes over the allocation of airlines to member states.
In excess of 2,700 carriers are due to be regulated once aviation joins cap and trade in 2012 with airlines required to meet the August 2009 deadline to report plans for calculating emissions based on passenger numbers, flights and operations.
However, confusion over which member states are to regulate which airlines has caused delays.
The financial repercussions for aviation are wide ranging with failure to comply resulting in the removal of free allowances amounting to 97 per cent of the 2012 cap and 95 per cent from 2013 onwards. Only airlines with fewer than 243 flights every four months or those that emit less than 10,000 tonnes of CO2 per annum are ineligible for inclusion in the scheme.
All qualifying airlines flying in and out of Europe must begin monitoring emissions from 2010. The economic downturn has crippled the airline industry with the International Air Transport Association (IATA) citing global losses of $10.4 billion in 2008.
US Climate Action Reserve heads to Mexico
The California-based US Climate Action Reserve has expanded into the international offset market by adopting two new protocols for Mexican landfill and agricultural methane projects.
The measure early last week clears the path for the introduction of international credits into the US market, providing that non-domestic credits pass the "big 5 test: real, permanent, additional, verifiable and enforceable". Mexico is a preferred host country for carbon in North America. Future Mexican reforestation protocols are being explored as well as frameworks for Canadian projects.
Oz bans bottled water
A small town in rural New South Wales, Australia has become the first to ban bottled water in order to reduce landfill waste and energy used to extract, bottle and transport the water.
VER Statistics
APX GS Registry: 108 (+2) Projects Listed
APX VCS: 36 (+0) Projects with Issued VCUs
CCX CFI weekly volume: 2,231,900Mt (+1,915,300Mt)
Climate Action Reserve: 45 Projects Listed (9 Issued)
TZ1 VER Registry: 41 VCS (+0) Public View Projects
Source: APX; CCX; CAR; TZ1
CDM Statistics
Total Issued CERs: 310.9Mt Issuances: 1,161
Total CERs Requested: 2.76Mt Host countries: 55
Registered Projects: 1,718 Requests: 47
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
This report is issued by MF Global UK Limited, which is authorised and regulated by the Financial Services Authority. References to MFG in this report shall mean MF Global UK Limited unless otherwise stated. The report was prepared and distributed by MFG for information purposes only. The report contains information and opinions, which may be used as the basis for trading undertaken by MFG and its officers, employees and associated companies. The report should not be construed as solicitation nor as offering advice for the purposes of the purchase or sale of any security, investment, or derivative. The information and opinions contained in the Report were considered by MFG to be valid when published. The report also contains information provided to MFG by third parties. The source of such information will usually be disclosed in the report. Whilst MFG has taken all reasonable steps to ensure this information is correct, MFG does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at their own risk and MFG does not accept any liability as a result. Securities and derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Registered Office: Sugar Quay, Lower Thames Street, London, EC3R 6DU. Registered in England No. 1600658.
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