Carbon Credits Surge to Six-Month High as EU Refines Eligibility

United Nations Emission Reduction Units surged 39 percent after Europe specified which credits are ineligible for use in its carbon market, the world’s biggest.

ERUs for December jumped as high as 25 euro cents ($0.33) a metric ton, the highest since Jan. 31, on the ICE Futures Europe exchange in London. The European Commission, the bloc’s regulatory arm, upgraded its carbon registry yesterday to clarify which offsets can be used to meet emissions obligations.

ERUs fell to a record low in May after the European Union said it may restrict the use of some offsets from countries including Russia and Ukraine should they fail to adopt new carbon goals as of this year. The credits, created from carbon-reducing projects in developed nations and emerging countries, may now narrow the price gap with more expensive Certified Emission Reductions from developing countries, according to Bloomberg New Energy Finance.

The majority of ERUs issued since the start of the year are “likely to be confirmed as eligible” because they have been certified by an audit firm, Richard Chatterton, a London-based analyst for New Energy Finance, said in an e-mailed note.

ERUs were trading at 22 euro cents a ton at 1:55 p.m. in London, while CERs fell 1.9 percent to 52 euro cents. Factories, power stations and airlines in the EU market can use either CERs or ERUs to match a limited portion of their emissions obligations.

“The difference between the CER and ERU price will continue to narrow as the market gains confidence that ERUs will ultimately be able to be exchanged for EU allowances,” Chatterton said.

Price Plunge

ERUs plunged to a record 6 cents on May 1 amid a surplus of carbon permits in Europe, where slowing economic growth has damped demand for the credits. EU lawmakers are still debating a plan to temporarily reduce supply and boost prices.

EU carbon allowances rose 1 percent to 4.17 euros a ton.

The UN 1997 Kyoto Protocol supports the development of carbon-cutting projects by awarding investors with ERUs or CERs that can be sold to companies and governments with pollution caps. One credit is equivalent to a one-ton reduction of carbon dioxide.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

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

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