Carbon credits prices are tumbling due to the prospects of increase in supply. Prices have fallen by more than 20 per cent in six weeks and are at a four-month low.
Spark Network believes that credits from HFC-23 (fluoroform, a potent greenhouse gas) projects will go up, as the suspension on such projects has been lifted. Also, many power plants have been shifting from coal to much cheaper gas, which is passing through a glut, leading to lower demand for purchasing such credits.
Certified Emission Reduction (CER, also called carbon credits) prices are trading only a little above the current financial year’s low, seen in July. They’re down nearly 20 per cent from the recent high of EURO 14.07 in October. Some months earlier, the United Nations’ Forum for Climate Change’s (UNFCC’s) clean development mechanism (CDM) had suspended carbon credits generated by HFC-23 projects, which had led to a rise in prices. However, many companies in India and China had sold such credits at EURO 9-10 each.
Lobbying by these buyers met with success and CDM approved the credits generated by such projects. The decision came last weekend and CER prices on the European climate exchange fell further in the beginning of the week, reaching a level which is the lowest in the past four months.
The CDM executive board’s decision to lift the suspension on the issuance of carbon credits to HFC-23 projects might have come as good news for the project developers, but it will have its repercussion on the pricing economics of carbon credits. The move is likely to press down the prices of the credits due to the enhanced supply.
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