Friday, July 19, 2013

Low carbon price: China will fix it

Don't stand on the sidelines yelling "The price is too low! It'll never work." Excess supply of Certified Emissions Reduction (CER) units is the major reason for the low carbon price today, says the Worldwatch Institute. China is especially hard hit as it dominates the Clean Development Mechanism (CDM) market with the largest investment of CDM projects in the world (US$220 billion, or 62% of total registered CDM projects globally. Under the current low CER price, CER credit buyers are demanding price renegotiation or even terminating their contracts with Chinese CDM projects because the agreed upon price was much higher when they enrolled. More than US$6.44 billion worth of CDM projects in China face default and carbon assets deflation.  But China is also an emerging carbon market. It will issue Chinese Certified Emission Reduction (CCER). Projects in China scheduled for CER could be transferred into CCER, thus reducing supply of CERs and helping to boost CER prices in the world market. China’s domestic carbon markets has the potential to absorb 600 million CER credits annually in the future, which should be enough to help initiate domestic emission trading.The EU Commission plans to increase its greenhouse gas emissions reduction target and retire some allowances permanently.  CERs are also expected to be accepted in more carbon markets in the future. 

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