Kyoto carbon offset profit margins evaporate

LONDON, Feb 13 (Reuters) - Profit margins for sellers of carbon offsets under the Kyoto Protocol have collapsed to zero as emissions prices tumble, analysts IDEAcarbon said, adding that new pricing trends may worsen things. In its weekly price survey dated Thursday, IDEAcarbon said average prices for U.N.-approved Certified Emissions Reductions (CERs) quoted by clean energy project owners have fallen below the market price at which project developers can sell them.

"This puts project developers in jeopardy because buyers can now purchase cheaper, risk-free CERs directly from the market," said IDEAcarbon's Tenke Zoltani, adding that the average cost of CERs to developers has risen above their market value.

Under Kyoto's $32 billion Clean Development Mechanism (CDM) scheme, firms such as EcoSecurities (ECO.L) can fund emissions cuts in countries like China, and receive primary CERs (pCERs) which can be sold for profit in the secondary market.

Heavy industry in the European Union can import a set quota of secondary CERs (sCERs) for use under the bloc's emissions trading scheme, though the economic slowdown and muted EU industrial output forecasts have severely dented carbon prices.

EU carbon permits for delivery in 2009 CFI2Z9, which heavily influence CER prices, hit an all-time low of 8.05 euros ($10.40) on Thursday, down nearly 50 percent so far this year.

IDEAcarbon said the average pCER price this week was 7.59 euros, 2 cents below the 2009-2012 Reuters CER Index price of 7.61 euros <CER/RTR>. This spread averaged 6.68 euros in 2008, peaking at over 10 euros last July.

pCERs that carry the least risk were priced at 8.72 euros, more than 1 euro above the market re-sell rate, IDEAcarbon said.

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