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While the global recession has brought down the prices of carbon credits, the United Nations climate change summit in Poznan (Poland) recently discussed the future of the Kyoto Protocol.
DNA spoke to Dr Ram Babu, managing director, Asia, of CantorCO2e, a global provider of financial services to the world’s environmental and energy markets, to gain an insight into the carbon credit market.
Why did number of new projects to be registered under the Clean Development Mechanism (CDM) reduce this year?
Any project that wishes to earn carbon credits through CDM needs to provide documents to demonstrate that the project would not be feasible without the CDM revenue, and also that there would be reduction in emissions because of the project. The CDM executive board recently brought in new conditions, which questioned that how could a project be already operational if it was not feasible without the CDM revenue.
Thus, the projects that started operating as CDM projects without being registered came under the scrutiny. A number of projects were put under review, delaying the registration by about 6-12 months. Almost 95% of the projects that came up for registration in 2008 came under review and there was more than 50% dip in number of projects that were registered in 2008, compared with 2007.
Why have the prices of carbon credits fallen though there was a dip in number of new projects?
The falling prices of oil and gas put downward pressure on prices of carbon credits (CERs). This was, however, offset by supply constraints due to drop in number of new projects to be registered. Prices of CERs have recently started falling after recession in Europe, as the amount of emission reduction they need to achieve has come down because of the revised industrial growth rate. Thus, the demand for CERs has come down. Now prices have come down by about 45% in the last three months, from 20 euros to 12.5 euros per CER.
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