Isramart : Slow recovery deters voluntary carbon investors

Isramart news:
The slow recovery of the voluntary carbon market is frustrating investors as trading remains sporadic and buyers focus on either high-quality credits or large volumes of lower-quality ones.

"There are deals out there but you have the entire market going after them," Grattan MacGiffin, head of voluntary carbon at brokers MF Global in London, told Reuters.

Buyers are concentrating on small clips of exotic recent vintage pre-compliance voluntary carbon units or large volumes of higher quality Voluntary Carbon Standard credits, MacGiffin said.

The voluntary market relies on businesses and individuals to self-regulate their carbon emissions in the absence of a legally binding climate agreement.
Demand for offset credits called verified emissions reductions (VERs) stalled last year when companies cut back on expenditure to reduce their carbon footprints due to the global economic slump.

Hurdles to a U.S. federal emissions trading scheme, continued uncertainty about the future of the global carbon markets and pessimism about clinching a global climate deal this year in Mexico has left some investors jaded.

"(The market) has picked up since the low point of 2009 but it is clearly not going back to being a robust voluntary market. We are only just beginning to see the signs of economic recovery," Lenny Hochschild, who manages Evolution Markets' Carbon America's Group, told Reuters.

There is also growing doubt that there are enough votes in the U.S. Congress to pass climate change legislation enabling a federal cap-and-trade scheme this year. Many investors believe a U.S. scheme will spur voluntary offset demand.

For a take a look on U.S. climate legislation click on [nCLIMATE].

"Prices are clearly softer after Copenhagen based on current sentiments with respect to cap-and-trade being passed this year," Hochschild said.

"Liquidity is down but deals are being done."

In the U.S., the state of Arizona said this month it will not participate in the Western Climate Initiative, a regional cap-and-trade scheme led by California, in 2012 because of the tough economy. [ID:nN11159093]

Some players said it was likely other states could delay the implementation of voluntary, regional schemes like the WCI.

Others said the market impact was minimal as investors were more focused on developments in federal cap-and-trade and a proposed ballot campaign to suspend California's Global Warming Solutions Act.

The 2006 landmark law places regulations on businesses to reduce the amount of greenhouse gas emissions.