UPDATE 1-Trading Emissions to sell over 5mln offsets in '08

LONDON, March 27 (Reuters) - Trading Emissions PLC expects to sell at least 5 million tonnes of carbon offsets this year as it tries to cash in on an expected shortage in 2008, the company said on the publication of its interim results on Thursday.

Trading Emissions PLC (TEP) establishes projects to cut greenhouse gas emissions in developing countries and sells the resulting carbon offsets to developed world countries, companies and individuals.

Demand for offsets is increasing as countries and companies face tougher targets to fight climate change and as more individuals and companies try voluntarily to cut their carbon footprint.

Offset supply through the regulated market under the Kyoto Protocol, worth around 12 billion euros ($18.94 billion) last year, is slowed by a lengthy U.N.-approval process meaning prices could be higher in the near-term in 2008 and 2009.

"We expect 5 million tonnes delivered and sold by end-2008," said TEP investment adviser Simon Shaw, referring to a spot market where projects have generated emissions cuts and the resulting offsets have been delivered.

"We're predominantly a spot seller (but) we might do a little bit more forward sales (this year)."

The risk of forward sales is that a company promises to deliver on a particular date more offsets than it actually ends up generating. That outcome forced another project developer, AgCert, to seek creditor protection last month.

TEP is awaiting an electronic link between the European Union's carbon market -- a major source of offset demand -- and the Kyoto scheme, expected by the end of this year, before more aggressive forward selling, Shaw said.

The company has so far forward sold 2.3 million tonnes of a risk-adjusted offset pipeline of 57.1 million tonnes in all project approval stages. The company's risk adjustment counts an average 55 percent of its forecast offsets.

Its projects have so far generated 1.9 million tonnes of generated, issued certified emissions reductions (CERs), a figure the company expects to rise to at least 5 million tonnes by the end of April 2009.

The company has a target to issue 66 million tonnes of CERs through 2012 and says it is on target to reach that, and hopes to exceed it. The company does not know what will be in the pipeline by the end of 2008, Shaw said.