The prices of Certified Emissions Reductions (CERs) continue to rise into June after a solid upward trend throughout May. New concerns over supply of the Kyoto CDM carbon credits, bullish signals on demand and the rising world oil price have combined to push up the price of issued CERs on the secondary market by almost 20 per cent since April 30.
On June 3, the price of the benchmark December 2008 CER futures contract hit €19 for the first time, closing at €19.04 on the European Climate Exchange. Dec 08s are up more than €3 in little over a month. Dec 09s closed at €18.55 and Dec 12s at €19.50.
 The dominating influence on carbon markets overall in the past month has been the inexorable rise in the world prices of oil and gas. This has seen increasing demand for coal among European power generators, in turn driving up prices for EU carbon emissions permits (EUAs) to €27, themselves a major influence on the CER secondary-market.
This market, dominated by European buyers, has followed the EUA market up but there have also been other factors specific to CER demand and supply pushing up prices. Trading volumes have lifted, bringing an end to the flagging demand in the market up to April after the European Commission proposed in January there be no new allowance for the use of CERs in the next phase of the EU ETS.
Hints that Germany might campaign against the European Commission proposal on CERs post 2012 have helped boost buyer sentiment. Adding to demand expectations is the amendment of the leading climate change bill heading to Congress in the US, to allow the use of international Kyoto-standard offset credits in its proposed emissions trading scheme.
Although the Lieberman-Warner bill is unlikely to pass Congress this time around, it is at least a reflection of the latest consensus thinking among pro-climate-action politicians on how future US global warming policy should be shaped.
Analysts’ predictions that the flow of new issues of CERs will be tempered by the earthquake in central China have added to supply concerns. The bulk of worldwide CER supply currently comes from China, which accounted for 73 per cent of all CERs issued last year. Ongoing delays in the processing of issuances by the CDM Executive Board has also caused analysts to downgrade total supply forecasts for the Kyoto commitment period up to 2012.
It’s always hard to get a feel for how prices in the primary CER market are changing. This is due to the varying contractual conditions in purchase agreements for future CERs in carbon offset projects under development. But you can be sure project developers and financiers will be watching EUA and secondary CER market developments and raising price expectations in response.
From €8 to €14 appears to be the range currently, depending on the stage pf the development of the project, host country conditions and the type of technology involved.
SRC: http://www.carbonpositive.net/viewarticle.aspx?articleID=1111
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