Carbon Trading Paralysed by EU Loophole

LONDON, March 17, 2010 /PRNewswire/ -- Trading of UN-backed carbon credits ground to a halt on Tuesday, due to a loophole that means used credits can find their way back to the market.

Exchange prices were heard plummeting to EUR1.00/tonne of CO2, while the effect in the over-the-counter market was to paralyse trading.

Confidence in the carbon market has been blasted by news that EU countries can re-sell these credits in the international market and make a profit, data from market analysts ICIS Heren shows.

Prices of this kind of UN-backed carbon credit - certified emission reductions (CERs) - are now falling, while trading volumes have almost dried up.

The price of UN carbon credits dropped to EUR11.60/tonne of CO2 in the traded over-the-counter market on Tuesday afternoon, compared with prices above EUR12.00/tonne of CO2 last week.

For companies that are obliged by EU law to buy carbon credits to comply with emissions targets, government-led carbon credit recycling means they risk buying a worthless asset.

The reason is that the EU only allows CERs to be submitted once, to avoid double-counting of emission reductions.

If the CERs that national governments have sold on the international market return to an EU buyer - through normal re-trading - this buyer will not be able to use the credits for compliance under the EU emissions trading scheme.

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. Through our reports we aim to bring liquidity and transparency to power and gas hubs, helping you analyse the sector and make informed business decisions.

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    Contact details, for more information and interviews:
    Isabel Save
    Editor, European Daily Carbon Markets
    ICIS Heren
    Tel: +44(0)20-7911-1942
    E-mail: [email protected]

SOURCE ICIS Heren