CARBON MARKETS
CER Options year. Based on known offset prices of
CERoptionsaretradedbyprojectdevelopers,investors,hostsand C$11.50(€7.25),weestimateamarket
carbonfundstohedgetheirforwardstreamsofCERsandlockinpart valueof€9.4mintheAERinH12008.
oftheirearnings.ThebigchangeintheCERoptionsmarketcamein Finally, Australia’s federal ETS, saw
May,whentheECXlaunchedCERoptionscontracts.Smallplayers twopubliclyknowntradesandpossibly
cannowuselistedoptionsonanexchangetoovercomethecounter- a few additional transactions in H1
partycreditissue. 2008. We count the known 20,000
Atotalof20.5mCERoptionswereclearedontheECXinMayand allowancesonly,whichtradedbetween
June 2008. Discounting this volume based on the likelihood that A$19 and A$20, for a total value of
eachoptionwillexpireinthemoney,wearriveatatradevolumeof €240,000.Volumehaspickedupsome-
6.2m CERs. Adding volumes from Nymex and from off the whatinH2.
exchanges,wegetatotaldeltavolumeof7mCERsandapremium In total, carbon markets outside the
valueof€70mforH12008. EUETSandCDM/JItraded19MtCO
2
e,
withavalueof€87m.
Joint Implementation
TheJImarketismadeupofprimary-marketERPAs,asnoemis- Conclusions
sionreductionunits(ERUs–thecarboncurrencyunderJI)haveso Threeconclusionsmaybedrawnfrom
farbeenissued.WeusethesamemethodologyforourJImarket this mid-year market assessment. First,
sizeassessmentaswedofortheCDM.Thisgivesanestimatedvol- theEUETShasincreaseditsshareofthe
umeof26mERUschanginghandsinthefirstsixmonthsof2008 markettotal,to70%ofglobalvolume
intheJImarket.Thisismorethandoublethe10mERUstradedin against 61% in all of 2007. It is even
the corresponding period last year. The value of the JI segment more dominant in value terms, with
wasabout€278m. 79%ofthetotalagainst70%lastyear.
ThegrowthislargelyduetothestartoftheKyotocreditingperiod. Second, market value is significantly
Additionally, several host country governments have said they up. The aggregate worth of H1 2008
intendtoproceedwithJITrack1duetolengthyandimperfectJISC transactions is already a full 94% of
approval procedures. Because it does not require UN project the value for all transactions in 2007.
approval,alaunchofJITrack1mayresultinearlyERUsverifications Thisisduetoseveralfactors,notablya
andissuanceforearly-moverJIprojects. higheraveragecarbonpriceof€20.61
pertonneCO
2
e,upfrom€13.36inH1
Other Markets 2007.HealthyEUAandsecondaryCER
MovingbeyondtheEUETSandKyotomechanisms,theNewSouth volumegrowthhasalsocontributed.
Wales Greenhouse Gas Abatement Scheme (NSW GGAS) remains Thirdly, carbon markets, market seg-
thelargestmarket.Thescheme,whichlaunchedin2003,sawabout mentsandplatformshavemultipliedin
18mNSWgreenhousegasabatementcredits(NGACs)transacted, thelastsixmonths.Initialtradeshave
representing€77minvalue. been seen under RGGI and in
Thefirsthalfof2008hasalsoseentradesunderthreenewcompli- Australia’s budding federal ETS, with
ancesystems.TheRegionalGreenhouseGasInitiative(RGGI)covers significant volumes also in Alberta.
tenstatesintheUSNortheastandMid-Atlanticregions,withthestate OptionstradingandauctionsintheEU
ofNewYorkaccountingforthegreatestshareofemissions.RGGIwill ETS,whilenotentirelynew,haveestab-
enter into force in 2009. The provincial Alberta Emitters Regulation lishedthemselvesduringH12008.The
(AER) in Canada has been operational since mid-2007. Finally, the same can be said for sCER exchange
andoptionstrading.
Carbon markets outside the EU ETS and CDM/JI
Thus,whiletheEUETShasreasserted
traded 19 Mt CO
2
e, with a value of €87m
its dominance this spring, the fastest
growthgoingforwardmaybeexpected
AustralianfederalETS,tobelaunchedinmid-2010andexpectedto elsewhere.RGGIinparticularlooksset
coverabroadsetofdomesticemission,hasseensomeearlytrades. to expand rapidly in the near future.
ThefirstRGGIallowances(RGAs)tradedinFebruary2008,anda However,thetotalvalueoftransactions
number of deals have since been reported – both forwards and in the new segments is likely to lag
options.WeestimateRGGItradevolumeat132,000metrictonnes behind trade volume, as the price of
CO
2
inthefirsthalfof2008,withavalueof€605,000.Thisvolume carbon remains much lower here than
is not particularly high compared to expected transactions in the intheEUAandsCERmarkets •
remainderof2008whenthefirstRGAauctionsaretobeheld.
In Alberta, the Canadian province, the 100 largest emitters must
Endre TvinnereimisSeniorAnalystwith
reducetheircarbonintensityby12%peryearfroma2003-05base-
PointCarbon.
line.Officialcompliancerecordssuggestthatapproximately1moffset
E:
et@pointcarbon.com
creditsand300,000“emissionperformancecredits”–issuedtocom-
panies performing better than their benchmark – traded so far this
www.pointcarbon.com
COMMODITIESNOW SEPTEMBER 2008 91
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