April 24 (Bloomberg) -- Prices for United Nations carbon offsets fell to the lowest ever as a ban on the use of some credits approached and as factories and power stations surrendered permits and credits to cover emissions in 2012.
Certified Emission Reductions, or CERs, for next-day delivery fell 86 percent to 1 euro cent ($0.01) a metric ton on London’s ICE Futures Europe exchange. The contracts have plunged from 19 cents at the start of the year amid a surplus of permits in Europe, where the region’s recession has cut demand.
Offsets representing reductions of hydrofluorocarbon-23 and nitrous oxide, known as grey CERs, will become ineligible for compliance in the EU emissions trading system after April 30. The credits, which make up 54 percent of the 1.3 billion of offsets issued since the market started in 2005, will only be eligible for use by developed country governments meeting emissions targets under the Kyoto Protocol.
“This is certainly not an apocalypse,” Daniel Rossetto, the managing director of Climate Mundial in London, said in an e-mail. “We are only a few days from the moment from which grey CERs become valueless once the EU ETS ban comes into effect.”
The record low comes a week after the European Parliament rejected a proposal to delay the supply of some carbon permits in an effort to boost prices. The EU market may be oversupplied by about 1.9 billion permits in the five years through 2012, known as Phase 2, Bloomberg New Energy Finance data show.
“CERs being sold at spot will almost certainly be industrial gas credits ineligible for EU ETS compliance in Phase 3,” said Richard Chatterton, a London-based analyst at New Energy Finance. “It isn’t surprising a trade has occurred at 1 cent as CER sellers holding grey credits are fast running out of options.”
The UN today issued the final tranche of grey CERs before the ban comes into effect. The Clean Development Mechanism Executive Board, which regulates offset projects, delivered 640,322 CERs to a nitrous oxide project in Brazil. A further 2.4 million grey CERs are scheduled to be issued for May 3 through May 20, though these won’t be eligible in the EU ETS.
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