UN Carbon Credit Supply Falls to 19-Month Low in September

Supply of United Nations carbon offsets fell to the lowest level in 19 months in September after credits dropped to a record.

The executive board of the UN’s Clean Development Mechanism, the body responsible for regulating Certified Emission Reductions, issued 14.5 million metric tons of credits in September, down 31 percent from 21 million in August, according to UN data compiled by Bloomberg. This month’s volume is the lowest since February 2011.

CERs are generated by clean-technology projects in developing countries that reduce pollution compared with a business-as-usual scenario. Factories and power stations participating in carbon markets in the European Union, Australia and New Zealand may use CERs to meet part of their cap on greenhouse-gas emissions.

The flow of credits will probably rebound in October, the UN data show. The CDM board is scheduled to issue 21 million new credits from Oct. 1 to Oct. 26, according to a timetable of requests for issuance on the UN website.

Total supply of UN offsets reached 1 billion tons on Sept. 7, and may reach the limit imposed by the bloc’s regulator by March, according to Barclays Plc.

“There is a real possibility” that the use of CERs and Emission Reduction Units may reach the 1.4 billion metric-ton limit set down for the second phase of the EU emissions trading system, which ends in March, Trevor Sikorski, an analyst at Barclays, said in a note on Sept. 24.

Waste Factor

Almost 4 million CERs from projects that cut emissions of hydrofluorocarbon-23 remain under review after regulators raised questions in June over their eligibility. The queries relate to the projects’ so-called waste factor, which determines the volume of credits they can generate, the board said at the time.

The UN generated 193 million CERs in the first nine months of the year. It authorized a record 320 million tons of credits in 2011.

Prices for offsets for December delivery fell as much as 4.5 percent to 2.11 euros ($2.73) a ton today on the ICE Futures Europe exchange, extending their drop this quarter to 50 percent. Offsets dropped to a record 1.43 euros on Sept. 18.

To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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