U.N. Carbon Scheme Investors Unlikely to Get Lifeline From Lima

Dec 12th, 2014 | By | Category: Carbon, Financing, News

vignetteReuters: Hundreds of companies in developing countries that invested in projects to generate UN-backed carbon credits had hoped the Lima climate talks would yield measures boosting the price of the credits, but they are likely to be disappointed.

Negotiators and carbon market experts say that discussions at the UN climate conference have not seriously addressed a collapse in carbon credit prices as diplomats focus on the type of commitments countries are expected to make in a new treaty expected next year.

“Our clients were hopeful of some type of decisions on that,” said Melissa Hirschheimer of Eqao Consulting which assisted many companies in Brazil develop and register projects at the UN.

Investors had hoped the talks, which conclude Friday, would include immediate commitments to reduce greenhouse gas emissions and increase demand for the UN’s Certified Emissions Reductions (CERs) credits or measures for CER purchases by some governments.

That in turn could draw crucial money to projects to reduce carbon pollution in developing countries, such as methane collection and destruction at landfills, that otherwise would be unlikely to find financing.

It could also guarantee returns for companies that spent between $100,000 and $300,000 to register each project at the UN’s Clean Development Mechanism (CDM).

GRADUAL SLUMP

The CDM, created by the convention on climate change, allows projects in developing countries to generate emissions reduction credits that could be bought by companies in rich countries to comply with targets to cut pollution.

The market for these UN offsets reached a peak of $30 billion in total volume in 2008, as the CERs touched 23 euros each in July that year.

But the economic slowdown in Europe dramatically cut the need for companies to buy those offsets, and prices started a gradual slump to the current 50 euro cents at the Intercontinental Exchange.

The slow recovery in Europe is insufficient to absorb the accumulated supply of credits.

The UN recognizes the problem but wants to preserve the mechanism.

Dirk Forrester, chief executive officer of the International Emissions Trading Association, said that some countries are trying to push the discussion on carbon markets to the main negotiation level where key issues in the next agreement are being debated. But that has not happened.

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