CER Permit Ban on Non-Kyoto Nations Is Bearish, Barclays Says

Restrictions on the use of United Nations Certified Emissions Reductions by countries not joining the second period of the Kyoto Protocol may cause CER prices to fall, Barclays Plc said.

Negotiators agreed last week in Doha to ban countries which don’t commit to binding emission-reduction targets from 2013 from using CERs to meet their greenhouse-gas reduction targets. Kyoto’s second period, known as CP2 or KP2, starts in January.

“While seemingly shrinking the market for CERs, the post-2012 call on CERs from countries not agreeing KP2 targets was always seen as extremely limited,” Trevor Sikorski, an analyst at the bank in London, said in an e-mailed note today. “If anything, it is bearish CER prices but with CER prices already so low, the remaining downside is tiny.”

CERs for December fell to a record 57 euro cents ($0.74) a metric ton on Dec. 4 and were at 60 cents on the ICE Futures Europe exchange as of 3:54 p.m. London time. Carbon offset and permit prices slumped this year as the euro-area recession damped industrial output and emissions.

Clean Development Mechanism projects may issue as many as 7 billion CERs by 2020, according to projections from the UN Environment Programme’s Risoe Centre in Roskilde, Denmark. Companies in the European Union’s emissions-trading system may use 1.2 billion CERs for compliance in the five years through 2012, according to Bloomberg New Energy Finance.

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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