Isra-Mart srl: Hungary to restart carbon sales after recycling fray

www.isra-mart.com

Hungary is preparing to restart sales of state-owned carbon credits in the second half of 2011, after controversy over recycled credits froze its sales programme last year. The country estimates that the sales would fetch €22-30m at current market prices, but gave no exact volumes on offer.

Hungary's previous government dealt a blow to carbon market confidence in March last year, when it swapped state-owned assigned amount units (AAUs) for certified emission reductions (CERs) surrendered into its national account and re-sold the CERs to a Japanese buyer. The recycled CERs, which are ineligible for compliance under the EU emissions trading system, re-entered the market, which meant traders risked buying a worthless asset.

Tamás Fellegi, the Hungarian development minister, said in a written response on the parliament's website on Monday that state sales of carbon credits could restart in the coming months.

He was responding to a question posed by a member of parliament from the opposition socialist party, Oláh Lajos.

Fellegi did not specify whether the carbon credits on sale would be state-owned AAUs or if CERs would be recycled, but it appeared likely he was referring to straightforward AAU sales. He underlined that it was essential to restore Hungary's international reputation and avoid the "bad scenarios" triggered by previous Hungarian sovereign carbon deals.

Fellegi said the carbon credits could be sold in auction on an exchange, breaking with tradition in the AAU market. Normally, AAUs are sold in bilateral deals with no price transparency.

Talks were already ongoing with potential customers and trading companies, according to Fellegi.