CARBON MARKETS
CARBON MARKETS – FIRST HALF VOLUMES ... FIRST HALF VALUES
Source: Point Carbon
involves the initial buying and selling In May and June, the EB signalled a tightening of rules in order to
of emission reductions from specific make it harder for non-additional projects to make it through the
CDM projects, whereby trades are pipeline. For this purpose, new tests were added to the CDM addi-
conducted throughemission reduction tionality tool.
purchase agreements (ERPAs).Bycon- The tougher EB line on additionality has led Point Carbon and
trast, the secondary CER market UNEPRisoe,forinstance,toreducesupplyforecastsforthe2008-12
involves trades in generic issued or period. CER prices have gone up as a result of reduced supply, but
guaranteed-delivery CERs that have this is also linked to the general EUA price trend.
normally been traded previously in pri- Notwithstanding the negative market signals, project inflow is still
mary transactions. high. Furthermore, trading activity remains strong in China, where
Total volume in the CDM market was projects continue to need a transaction to gain host country
502 Mt CO
2
e by Point Carbon’s esti-
mates,withavalueof€7.6bn.Ofthis,
The dominant project types in known transactions
theprimarymarketaccountedfor213
have changed radically since last year
Mtor43%ofthevolume.Thesecond-
ary market continued to outpace the approval.Indiahasseenfewprimary-marketERPAs,inpartbecause
primary market, with 281 Mt traded projectdeveloperstendtoholdontotheirCERsuntilissuance.Aside
(or 56%). In addition, CER options from these two countries, new activity has been seen particularly in
volume was 7m, making up roughly Indonesia and Vietnam so far this year.
one percent of total CER transactions Thedominantprojecttypesinknowntransactionshavechanged
in H1 2008. radicallysincelastyear.Sofarthisyear,energyefficiencyprojects
dominate in volume terms, whereas the largest number of trans-
Primary CER Market actions is found in the field of renewable energy, notably hydro
The primary market volume in H1 and wind. China remains the main host country for primary CDM
2008isone-quarterlessthanvolumein transactions.
the first half of last year. This estimate
is based on Point Carbon’s proprietary Secondary CERs
transaction and project databases. Secondary CER volume in H1 2008 was 281 Mt, or three times the
The decline is linked to two policy volumeseeninthefirsthalfof2007.Thevalueofthesegmentwas
developments. The first is the EU ETS €5.2bn, or two-thirds of the total CER market segment.
reviewproposal,whichcausedadropin Exchange sCER trading took off in the first half of 2008. While
expected credit demand. The second is only Nord Pool offered CER futures in 2007, traders can now
the tightening of rules by the CDM choose between the ECX, EEX, Bluenext, Nymex and the CCX. A
Executive Board (EB), which caused a substantial share of brokered sCER volume is now cleared on the
drop in expected CER supply. In exchanges, emphasising the increasing importance of exchanges
January, the European Commission in the sCER market.
proposed to reduce Phase III CER The bilateral market comprises secondary CER deals not going
demand to nothing beyond Phase II through brokers or being traded on an exchange. This segment is
leftovers without a “satisfactory” inter- dominated by large banks.
national climate deal. The proposal We estimate that exchanges make up one-tenth of total sCER vol-
sent a strongly negative signal about ume, while the bilateral and OTC segments share the remaining
future European CER demand. 90% more or less equally.
90 SEPTEMBER 2008 COMMODITIES NOW
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