LONDON (Reuters) - One of the world’s biggest developers of carbon offsets, UK-based EcoSecurities Group ECO.L, slashed its product pipeline by a fifth on Tuesday, prompting a 47 percent collapse in share price.
The company blamed bureaucratic delays in a United Nations project approval process, and warned that its full year revenues and earnings will be below expectations.
The Kyoto Protocol on global warming allows rich countries to meet domestic greenhouse gas emissions limits by buying carbon offsets from developing nations.
Trade in offsets has attracted western speculators who hunt the most lucrative emissions-cutting projects, to cash in on differences in carbon prices around the world.
EcoSecurities planned to tackle the project approval delay by selling some carbon offsets which it is already generating into the voluntary carbon market, which commands lower prices than the formal market administered by the United Nations under the Kyoto Protocol, but by-passes U.N. approval.
“We are seeking to mitigate the impact of these delays wherever possible by, for example, selling pre-registration credits into the VER (voluntary carbon) market,” said Chief Executive Bruce Usher in a trading update.
The company downgraded its project pipeline, from 456 projects as of September 5 to 402 on Tuesday.
The company has 158 projects which are operational but only 89 with U.N. approval.
It slashed its pre-2012 carbon offset pipeline to 130 million tonnes of avoided carbon dioxide emissions — also called certified emissions reductions (CERs) — from 163 million.
In addition, the company has some 92 million CERs for delivery after 2012 — when market certainty drops — and 5 million tonnes of carbon offsets for sale in the voluntary market.
These numbers are mostly for projected delivery, some of which the company acknowledges will not happen. Finance Director Jack MacDonald told Reuters last month that a 25 percent risk discount was about right, which would imply a pre-2012 portfolio of 98 million tonnes.
At the moment the company actually has just 500,000 tonnes of CERs ready for sale, and has already signed contracts to sell 29 million tonnes through to 2013.
Additional reporting by John Bowker and Mike Elliott