LONDON (Reuters) - A United Nations agency cut its forecast on Wednesday for pre-2012 Kyoto Protocol carbon offsets by 3 percent, estimating that only 981 million tonnes will come to market by the end of 2012.
Under Kyoto, efforts to cut greenhouse gases can be outsourced to emerging countries such as China and India through investment in clean energy projects registered under the UN’s Clean Development Mechanism (CDM) scheme.
Investors receive offsets in return, called Certified Emissions Reductions (CERs), which can be used toward emissions reduction goals or sold for profit.
“The issuance in July was extremely low, only 2.5 million CERs. Due to this and the 22 projects rejected (recently) ... we decreased our projection for the amount to be available by the end of 2012,” the UNEP Risoe Center said on its website.
Around 76 million more CERs could come soon from projects on the issuance waiting list, it added.
CER supply forecasts are of particular interest to utilities and industrial firms in the European Union, which can use CERs for compliance under the bloc’s emissions trading scheme.
Issuance dropped in July due to the phase-in of new procedures, a UN spokesman said last month.
The UN’s climate change secretariat has issued a total of 423.6 million CERs to date.
Future issuance may be in jeopardy after the CDM’s executive board last week rejected 22 projects seeking approval under the scheme, which would have cut 12.5 million tonnes of carbon dioxide by 2012, and said it would conduct another spot check at the offices of the CDM’s largest emissions cut verifier.
Det Norske Veritas was suspended in late 2008 for three months for procedural breaches. Analysts said this and subsequent suspensions at three other emissions auditors since have choked the flow of CERs to market.
UNEP Risoe estimated in July that 1.012 billion CERs would be issued by the end of the 2012, when Kyoto’s first leg ends. That was up from a record low prediction of 975 million made in June.
The agency’s pre-2012 CER estimate has been sliding steadily as it has trimmed over 100 million CERs since the beginning of the year. The estimate is now around half the number predicted in 2007.
Supply concerns have caused the CER futures curve to become backwardated, with spot prices at 12.18 euros a tonne on Wednesday, trading around 10 cents above the Dec-10 futures and nearly 40 cents above the Dec-12s.
Average wholesale CER prices, or the initial price paid to the project owners, were around 9.50 euros per tonne late last week, according to analysts IDEAcarbon.
Reporting by Michael Szabo; Editing by Jane Baird