UN Carbon Supply May Rise as Sellers Rush to Beat 2015 Deadlines

Supply of United Nations carbon offsets may rise after February as owners of offsets rush to sell them before their eligibility ends in the European Union’s market in March 2015, according to Bloomberg New Energy Finance.

The executive board of the UN’s Clean Development Mechanism, the offset market regulator, will issue 5.9 million metric tons of Certified Emission Reductions this month, the lowest monthly total since July 2010, according to UN data compiled by Bloomberg. That’s a drop of 36 percent from the same month last year and 91 percent less than the record 63 million tons supplied last March.

CERs that represent cuts in discharges made before the end of 2012 under the first phase of the UN’s Kyoto Protocol become ineligible after March 31, 2015, for use in the EU emissions-trading system, according to the bloc’s rules. From April 1, 2015, only CERs that represent reductions made after Jan. 1, 2013, will be eligible. The EU proposed last month to ban the use of offsets in its carbon market after 2020.

“We expect the issuance rate to have bottomed out,” Richard Chatterton, an analyst in London at Bloomberg New Energy Finance, said today by e-mail. “It’s likely that supply will rise from here until the end of the year as people rush to monetize credits for the first Kyoto commitment period while they still have the chance.”

Companies that operate clean-energy projects in developing countries earn one CER for every ton of carbon dioxide they cut compared to a business-as-usual scenario. The credits can be used by factories and power stations in the EU emissions market to meet some of their caps on climate pollution every year.

Prices for CERs plunged as much as 99 percent from their record 23.38 euros ($31.54) a metric ton in April 2008, and were trading at 43 euro cents a ton at 3:18 p.m. on London’s ICE Futures Europe exchange.

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