The recent released by IDEAcarbon reveals that current carbon prices don’t seem to match up with market rules of supply and demand. An states prices of carbon credits seem to be underrated, as last month witnessed a sharp downward price trend. The Dec 2008 value of EUAs went down by a big 25% from €29.33 on the first day of July to €21.21 on Aug 4. Similarly, CER prices decreased by nearly 20% during this time.
Why is this at odds with market fundamentals? First of all, supply of credits has not seen much change recently. March estimates of the total CDM plus JI projects were reported to equal 1.69 billion carbon credits by 2012. Even amongst these 1.69 billion, some would be saved for 2013 and beyond if more profit is speculated this way. On the other hand, demand for carbon credits is going to increase because recent proposals say phase II quota cannot be taken into phase III whereas extra CERs can be exchanged for EUAs later. Hence, businesses would be motivated to use up their phase II CDM/JI quota now.
With respect to phase II, analyzes supply and demand dynamics dictate a ballpark figure of €29 for EUAs and €24 for CERs. And when these amounts are compared to the present rates that are considerably lower, it seems carbon credit rates will move upwards in mid-term phase II.
{ 1 trackback }
{ 0 comments… add one now }
Leave a Comment