Isramart news:
European and United Nations carbon prices fell the most since February after the Copenhagen climate accord didn’t set targets that would boost demand for permits.
European Union carbon-dioxide allowances for delivery in December 2010 declined as much as 8.7 percent to 12.40 euros on the European Climate Exchange in London. They traded down 5.7 percent at 1 p.m. on the first day of trading since the summit concluded Dec. 19.
The agreed targets in the Copenhagen deal amount to a “bunch of negotiation ranges” that investors had already factored in, Trevor Sikorski, an emissions analysts for Barclays Capital, said in a phone interview after returning to London from the Danish capital. “It seems to be below even our modest expectations.”
U.S. President Barack Obama said the climate-change accord he reached with China and most of the 193 attending nations on Dec. 18 was an “unprecedented” first step to slow global warming. Environmental groups such as Friends of the Earth called it a failure because it’s not a binding treaty and the targets fall short of what the United Nations climate adviser said is needed to prevent catastrophic climate change.
Today’s decline for permits in the EU, which runs the world’s largest cap-and-trade system, extends last week’s drop of 6.8 percent. Allowances for delivery in December 2010 have fallen 22 percent this year as the lack of progress on climate talks and recession reduced demand.
Second-Biggest Market
The UN’s Certified Emission Reductions credits for delivery next year fell as much 7 percent, the most since Feb. 20, and traded at 11.10 euros as of 1:05 p.m. on London’s European Climate Exchange. The credits, which trade in the world’s second-biggest carbon market, are down 19 percent this year.
The U.S. will probably cut its emissions by 14 percent to 17 percent from 2005 levels by 2020, subject to approval in the Senate, according to an information note circulated by European Union officials in Copenhagen along with the accord.
Today’s drop in carbon prices “is obviously linked to Copenhagen, but we’re surprised by that, because when it comes to the carbon market nothing has changed,” Jos Delbeke, deputy director general for environment at the European Commission in Brussels, said in an interview in Brussels.
The EU said it will stick to its target of cutting emissions by 20 percent from 1990 levels, and is on track to meet the goal. The bloc had considered upping its target to 30 percent if countries like the U.S. and China pledged further cuts.
‘Dispirited’ by Outcome
Prime Minister Fredrik Reinfeldt of Sweden, speaking for the 27-nation bloc, said EU leaders decided to stay at 20 percent. That will help drive EU prices lower, Sikorski said.
“It would be foolish to be anything other than dispirited by the outcome” of the Copenhagen meeting, the International Emissions Trading Association said today in an e-mailed statement. The climate talks were a “step backward” in terms of signals that will support carbon prices, Henry Derwent, president of the Geneva-based group, said in the statement.
The talks did make some progress in setting a precedent for “highest level” political participation in climate talks, Derwent said.
“Heads of state are engaged and negotiating,” he said. “The few biggest polluters are lining up as the key parties for future negotiations. Indeed, a precedent appears to have been set in terms of getting a political deal first and turning it into a global framework later.”
Offset Credits
The U.S. is considering a law that may boost demand for so- called offset credits from the UN starting around 2012. The credits, awarded to companies and investors from richer countries that pay for emission reductions in the developing world, can be used for compliance in the EU market.
The two-week climate meeting, concluded a day behind schedule, failed to deliver most of improvements needed in the UN market, said Kim Carnahan, a UN emissions-trading researcher at the emissions trading association. Its members include Goldman Sachs Group Inc. and Royal Dutch Shell Plc.
Changes agreed to for the UN’s Clean Development Mechanism were “not decisive action to which the market can immediately react,” Carnahan said by e-mail.
UN envoys put off action on proposals for so-called “standardized baselines,” which would have made it easier for projects that reduce emissions more than industry benchmarks to win credits, according to a text approved in Copenhagen.
‘Incredibly Frustrating’
Projects are now approved on a case-by-case basis and must show they need credits to be feasible. That approval process has produced a backlog, with 66 percent of 5,641 of the proposed projects that the UN received since 2003 waiting as of Dec. 4, according to data compiled by Bloomberg. The proposal for industry baselines would have meant more credits, traders said.
“I find it incredibly frustrating” that countries can spend days discussing potential technological solutions to climate change such as synthetic trees while they “punt critical issues like standardized baselines” to a technical working group for a year, Carnahan said.
The UN carbon market has staffing shortages and needs more than six months to streamline approvals, Lex de Jonge, chairman of its regulatory board, said this month.
“We are not going to come back on Jan. 1 and see a jump in the issuance,” Alessandro Vitelli, director of strategy and information at IDEAcarbon in London, said in an interview Dec. 19 in Copenhagen.
An appeals process, better communication between the CDM board and project developers, as well as smoother registration and issuance procedures may help the program boost productivity next year, he said.