UN Carbon for 2012, 2013 Fall to Records on Oversupply

United Nations Certified Emissions Reduction credits for this year and 2013 dropped to records as the European carbon market is oversupplied and UN regulators consider requests for supply.

CERs for December this year dropped 9.1 percent to 2.61 euros ($3.20) a metric ton on the ICE Futures Europe exchange in London as of 5:24 p.m. CERs for the same month next year fell 5.6 percent to 3.02 euros a ton.

The Clean Development Mechanism executive board, the Bonn, Germany-based regulator of the UN market, will review supply requests for 5 million tons of hydrofluorocarbon-23 emission credits by the middle of next week, potentially adding to supply, Richard Chatterton, an analyst for Bloomberg New Energy Finance in London, said today in an e-mailed note. The EU market is oversupplied by 14 percent in the five years through 2012, including UN offsets, according to a New Energy forecast.

“We haven’t seen the bottom of the market by a long shot,” Gus Hochschild, an analyst at Mirabaud Securities LLP in London, said today by phone.

Hochschild earlier today dropped his price forecast for Trading Emissions Plc, a London greenhouse gas offset developer, by 10 percent, before the latest decline in CER prices.

The bank values Trading Emissions at 20.8 pence a share, compared with a previous forecast of 23 pence, he said in an e-mailed note. Trading Emissions fell 7.7 percent today to close at 22.5 pence in London.

Open interest for UN offsets rose by the most in at least two and a half years on ICE Futures. The measure may rise as prices fall if traders sell credits on the expectation of buying back later for a lower price.

UN Market

Open interest, which records the total number of buying and selling positions in a particular contract that haven’t been closed, rose by 5.3 million metric tons, or 2.3 percent, to 240 million tons on July 27.

The UN-overseen Joint Implementation program registered 21 new projects in July, capable of accounting for 110 million tons of Emission Reduction Unit credits, Trevor Sikorski, an analyst in London with Barclays Plc said today in an e-mailed report.

“With a good part of that being potentially issued this year, the CER and ERU markets could see further pressure,” he said.

European Union carbon allowances for December dropped 3.9 percent to 6.65 euros a ton on ICE.