Newsletter

1. CF PARTNERS CARBON MARKET SNAPSHOT
6th October 2009
MARKET PERSPECTIVE CF Partners Market Pricing
Primary:- Demand for CERs and ERUs persists despite Poland and Estonia’s court appeals Primary CDM €
• The suspension of SGS UK Ltd., the largest carbon project verifier, is likely to slow down the UN
Post PIN, Pre PDD, HC Approval 7.50-9
project process and further issuances. Buyers believe that the SGS suspension could be
symptomatic of future delays in the UN registration process. At Validation 9-10.50
Secondary:- EUA/CER prices plunge after court decision Registered & Non-Guaranteed 9.50-11
•Following the news on Poland and Estonian National Allocation Plans (NAPs) being dismissed by Guaranteed 11.50-12
the European Court, the EUA/CER spot prices drop after a fear for an extra 815 million EUAs hitting
Post 2012 65-75% sCER*
the system. There was also concerns for the system going forward as more countries might appeal
their NAPs. Exchange Prices €
•The EUA/CER swap narrowed below €1 after the NAP announcement as EUA prices fell more than Spot BNX CER 12.15
CERs. EUA prices fell below the all important support level of €13 on Friday night but have Spot ECX EUA 13.09
bounced back again on Monday. The compliance spread in Dec 09 is now at €1.12.
ECX Dec 09 CER 11.89
Post 2012:- China ready to approve post-2012 projects
•Increasingly European compliance buyers are willing to buy post 2012 primary CERs including ECX DEC 09 EUA 13.12
projects from India and China. ECX DEC 12 EUA 14.75
Carbon Volatility:- Carbon Volatility continues to rise EUA-CER Spread 0.94
• Mid Market EUA volatility now at 58%. We expect to this rise and stay high through COP 15.
Source: ECX, BNX and CF Partners at 05/10/09
MARKET DATA: SGS SUSPENSION RAMIFICATIONS Number of projects per Designated Opertaing Entity
The ability of the CDM Process to produce CERs was again called 1800
Source: UNEP RISOE CDM Pipeline Overview
into question with the recent suspension of SGS, the British
based Designated Operating Entity (DOE), after they were 1600
unable to prove that staff had properly accredited CERs 1400
approved for the global carbon markets. Following the 1200
suspension of DNV last November, many of their projects shifted
to SGS. A lack of resources is thought to be the reason for the 1000
SGS suspension. The graph to the right shows the number of 800
projects per DOE. Projects that have already been verified or are
600
yet to be verified by SGS account for roughly 14% of projects in
the CDM Pipeline. This represents a 3 month suspension in the 400
Verification process of more than 300m pre-2012 CERs, or 200
roughly 9% of pre-2012 supply. However, analysts estimate that
0
the suspension will delay the Issuance of some 20m CERs; owing
to the backlog of issuance requests, it will be 2-3 months before
we see any observable effect in CER issuance.
Some project developers have a large exposure to the SGS suspension, in some cases causing an interruption in the CDM process for nearly all
of their portfolios. The constraint to the supply of issued CERs is expected to be noticeable from November 2009 to March 2010. The
suspension will constrain the supply of CERs and impact on delivery obligations, which may push CER prices higher relative to EUAs.
NEWS OF THE WEEK
EU in tussle over CO2 Emissions: The commission had disputed the National Allocation Plans drawn up by Poland and Estonia for the 2008-2012
carbon trading period.
Rich nations trying to kill Kyoto pact, says China: Lumumba D'Aping, who chairs the G77 plus China negotiating group, told reporters: “it has
become self-evident and actually clear that the intention of the developed countries is to kill off the Kyoto Protocol“.
States push into global climate talks over forecast: Eleven governors issued a call for leadership to their presidents to stop deforestation.
Hu’s carbon commitment marks new era for China: Chinese President Hu Jintao's promise this week to cut "carbon intensity“ was a sign to the
climate change has become a priority for China’s leaders.
Poland, Estonia Win Challenge to CO2-Emission Limits: Poland and Estonia have won appeals at a European court over their National Allocation
Plans, which ended up pulling down carbon prices.
Obama unlikely to sign climate bill before Copenhagen: John Kerry and Barbara Boxer unveiled a climate bill last week but it was suggested
that this bill was unlikely to be signed in time for the Copenhagen meetings.
UN’s Ban: EU role critical to reach UN climate deal: Ban said: "The European Union can play a role as locomotive”.
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