Trading has picked up in the voluntary market for Verified Emissions Reductions (VERs) on the back of the successful passage of the US climate bill through the House of Representatives. Certified Emissions Reductions (CERs), meanwhile, have remained flat.
Enthusiasm among VER buyers given the offsets-friendly nature of the Waxman-Markey bill is working counter to the slump brought on by the global economic downturn, and leading to a moderate pick up in prices.
Generous
domestic and
international offset provisions that appeared in the bill’s first draft have only been strengthened in the final form. The widening of eligible activities to farming and favourable treatment for the leading voluntary market verification standard have also added impetus to the market.
The cap-and-trade bill still must pass the Senate where more changes are inevitable but this hasn’t stopped a rise in trades through a number of registries, MF Global reports. It says renewable energy credits verified to the Voluntary Carbon Standard (VCS) are found in the $4 to $5 range in early July. This compares to an average price for VCS credits, called Voluntary Carbon Units (VCUs), of $3.70 reported by New Carbon Finance in May.
The US bill has given the VCS the right to apply to be an accredited third-party verification standard for the US offsets market. Carbon brokers Evolution Markets says it appears very likely the application will succeed. The VCS would join the regulated state-based standards, the Californian Climate Action Reserve (CAR) and the RGGI scheme, as standards carbon project developers could use to access the large offsets market. This is proposed at up to 2 billion a year, the scheme’s start in 2012.
Likewise, there has been buying interest in the CAR credits, Carbon Reduction Tons (CRTs), up a $1 in the over the counter market - to between $7 and $8 for the 2009 vintage. CRTs on the Chicago Climate Futures Exchange are in the $5-$6 range, up slightly but suffering from illiquid trading.
The Waxman-Markey bill's provisions for recognising CAR and RGGI
"early action" credits pre-dating the proposed federal scheme has led to sizeable speculative demand for these VERs in recent months. However, the latest version of bill was less generous on the conversion value
of these credits and that speculative trade now appears to have lessened somewhat.
The more European-focused Gold Standard VERs have also lifted, fetching €8 to €9 ($11-12.50), MF Global says.
The CER market is under very different influences, dominated by European ETS allowance trade and recent movements in the oil price. Prices for issued CERs in secondary market trade have been flat around the €12 mark in the first week of July. On the European Climate Exchange on July 8, Dec 09s closed at €12 even after trading between €11 and €13 in June. Dec 10s closed at €11.83 and Dec 12s at €12.21. In the primary CER market, forward prices for delivery across 2009-12 are ranging from €7.70 to €10, according to IDEAcarbon.