WebConnect

2 December 2011

Source: IDEAcarbon using UNFCCC data

 

Despite weak issuance this week (partially because we included Friday’s issuance in last week’s figures) we can now see that November was not a bad month for CER issuance overall, with 23,656,887 CERs issued, just a bit below the 2011 average of around 26m. Credits from HFC/N20 projects made up 64.6% of the total well above the 57.3% average over the year as a whole. Although it may be an anomaly, the high proportion of ‘grey’ CERs is discouraging. With the first programmatic CDM project to request issuance being rejected by the EB this week, there are concerns that CERs from LDCs may not be able to meet demand from the EU ETS in Phase III (which will only accept LDCs CERs post-2012).

It could be that ‘grey’ CER project are rushing to get as many CERs to market as possible before the end of Phase II but we believe that those projects are issuing at maximum capacity anyway and there is, in fact, a more troubling explanation. With CER prices as low as they are, both in secondary and primary markets, HFC, N20, and possibly large hydro and wind power in China are the only types of project which can make money at these prices. As such, other types of project, such as methane capture, biomass, run-of-river of LDC wind may be choosing not to issue at these prices. That sets a worrying precedent for CER supply to the EU ETS in Phase III. That might be bad for the CDM industry but good for EUA prices.