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UN Carbon Has Record Weekly Plunge as Supply From Coal May Gain

United Nations Certified Emission Reductions had their biggest weekly plunge as supplies from more-efficient coal plants in emerging nations may increase.

Certified Emission Reduction credits for December dropped 30 percent to 1.68 euros ($2.21) a metric ton on the ICE Futures Europe exchange in London, the most for a week since the contract was first offered in March 2008. They dropped 13 percent today. European Union carbon for this December declined 11 percent for the week and 4.6 percent today to close at 7.45 euros.

The Clean Development Mechanism Executive Board yesterday approved a revised set of rules governing how many emission credits more-efficient new natural gas- and coal-powered generators are eligible to receive in emerging and developing nations. That conclusion will boost supply and cause prices to fall, Eva Filzmoser, director of CDM Watch, the Brussels environmental lobby group, said yesterday.

“This is the worst board decision in years,” she said in an e-mailed statement. The ruling, which didn’t accept recommendations from the board’s own technical panel, will result in credits for stations that would have been constructed even without the revenue from selling the offsets, Anja Kollmuss, an emissions trading specialist at the lobby group, said today by phone.

“They would have been built exactly the same way,” she said by phone. The coal plants might even be formed into so-called programs of activities, where each station doesn’t need individual approval from regulators, she said by e-mail.

David Abbass, a spokesman for the board, didn’t immediately return two e-mails and a phone call seeking comment.

CERs have dropped 81 percent in the past year, while EU carbon has fallen 42 percent.

Market Glut

The EU market, where emitters can use UN credits for part of their compliance needs, will probably be oversupplied by 1.6 billion tons in the five years through 2012, according to a forecast yesterday by Bloomberg New Energy Finance, the London research company.

Taking into account forward power hedging demand by utilities, the “real surplus” is about 600 million tons, Konrad Hanschmidt, an analyst at New Energy Finance, said by e-mail. Total carbon-dioxide emissions in the EU program this year will be about 2.2 billion tons, New Energy forecasts.

Sales of Phase 3 EU carbon allowances under a program to release some volume ahead of next year may surge 152 percent in November compared with October, according to a Deutsche Bank AG forecast. That phase begins next year and runs through 2020.

Total volume sold under that program may jump to 63 million metric tons in each of November and December from 25 million tons in October, Isabelle Curien, an analyst for the bank in Paris, said today in an e-mailed research note.

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