World Bank Resumed Carbon Credit Sales After Fund Missed Higher Prices
The World Bank, acting as trustee for the United Nations Adaptation Fund, resumed sales of UN emission credits at the start of this month after the fund missed higher prices at the end of last year.
“The Adaptation Fund Board instructed us to restart sales on Feb. 1,” said Angela Gentile, a bank spokeswoman in Washington. “It was not based on Certified Emission Reduction (BNSCER) prices,” she said yesterday by e-mail in response to questions.
The fund, with a secretariat based in Washington, uses proceeds from the sale of 2 percent of all CERs to help finance projects that help poor nations adapt to climate change. It stopped sales Oct. 5 after attempted thefts of CERs, according to a Feb. 3 report on its website. Its board instructed the World Bank on Nov. 22 not to sell any more CERs because they were “still below a defined price level,” which the report didn’t specify.
By delaying sales, the fund’s stockpile of CERs has diminished in value as prices fell. UN credits dropped 56 percent to a record-low 3.47 euros ($4.61) a metric ton on Jan. 16 from 7.85 euros on Oct. 5, according to data from BlueNext SA in Paris, the biggest prompt carbon market. Credits rose 3 cents to 5 euros as of 3:28 p.m. in Paris.
Refrain, Resume
At a meeting ending Dec. 14, the board, whose chairman is Ana Fornells de Frutos of Spain, “instructed the bank to continue to refrain from CER sales until market prices increased to a level defined by the board,” according to the report. “If CER prices did not increase to the defined price level set by the board, by the defined date set by the board, the trustee would nevertheless resume sales as of that date.”
Fornells de Frutos and Marcia Levaggi, the Adaptation Fund manager, didn’t immediately respond to at least two e-mailed requests for comment since Feb. 20.
CERs are generated under the UN-overseen Clean Development Mechanism, the world’s biggest offset market.
The resumption on Feb. 1 of sales on BlueNext is in accordance with the board’s so-called monetization guidelines, Gentile said.
Since it stopped sales, the fund built up a stockpile of 5.5 million tons of credits, according to the report from the December quarterly meeting. These are worth 27.5 million euros at current prices, compared with 43.2 million euros at Oct. 5 prices.
As of Oct. 5 the fund had sold 9.96 million tons of CERs at an average 12.43 euros a ton, or a total of 123.8 million euros.
‘No Certainty’
The fund may have 12.6 million to sell this year, based on historic issuance and UN forecasts, according to the report. Prices have plunged partly because supply has surged.
The fund may not repeat its suspension of sales, the World Bank said in a Feb. 14 statement, responding to questions from the fund’s board.
“There is no certainty with respect to future CER prices,” the bank said, acting in its capacity as trustee. “If CER prices did not increase after breaching an established floor price, or kept falling (even gradually), the Adaptation Fund would risk being out of the market at a time when it may have been beneficial for regular sales to have continued, even as prices declined.”
Two thirds of the fund’s expected credits may be from certain industrial-gas projects, it said. These credits are banned for use in the European Union carbon market, the world’s largest, starting May 2013.
The bank prepared its answers before a meeting of the fund’s board in Bonn, scheduled for March 14.
To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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