Carbon Prices Hit Highs as the EU Moves to Ban Controversial Credits

LONDON, August 26, 2010 /PRNewswire/ -- CER prices soared to hit a four-month high on Thursday on news that European companies could be banned from using carbon credits from controversial offset projects, according to ICIS Heren data.

"If the EU bans all industrial carbon credits, the supply of credits would drop by around 75%," Isabel Save, carbon editor at ICIS Heren, said.

Late on Wednesday, the EU issued a statement saying it had taken a first step to restrict the use of carbon credits from large-scale industrial projects.

These mammoth offsets schemes have come under fire from green groups, which say they actually raise emissions instead of cutting them. The reason is that they can make money from inflating their output and selling carbon credits, even when demand for their products is falling.

ICIS Heren data shows prices in the over-the-counter market rising to EUR13.55 per tonne of CO2 on Thursday for UN-backed carbon credits. European companies active in the carbon market - mainly power generators and banks - are covering an expected shortfall, having sold credit forward.

The UN has already launched a probe into carbon projects destroying the greenhouse gas hydrofluorocarbon (HFC-23), due to suspicions these projects have gamed the system and operated purely to get carbon cash.

The EU restrictions would come into place at any point after 2013. Project lead times mean that investors need to know at least three years in advance what type of credit will be allowed in the EU emissions trading system, before committing any money.

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Note to editors :

The EU has so far allowed European companies to offset part of their emissions in developing countries, by buying so-called certified emission reductions (CERs) from UN-led projects to cut emissions. The UN issues one CER for each tonne of CO2 avoided compared with a business-as-usual emissions scenario.

European companies can offset on average 13% of their emissions through CERs.

ICIS Heren is an information service provider for gas, liquefied natural gas, power, carbon and coal market intelligence. We publish a suite of tailored reports providing news, analysis, benchmark price assessments and indices.

    For more information visit http://www.icis.com/heren
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    Contact details:

    Isabel Save
    Editor European Daily Carbon Markets
    ICIS HEREN
    Tel: +44(0)20-7911-1942
    E-mail: [email protected]

SOURCE ICIS Heren