CER Market Wrap

The Certified Emission Reductions (CERs) managed to break through the €14 level on Monday closing at €14.07. However, the December 2010 futures contract could not hold that level, losing ground over the rest of the week to close on Friday at €13.60. With very little news in the CERs or the European Union Allowances (EUAs) markets, technical trading determined direction. The EUAs reached a four-month high on Monday and took a key technical level but were unable to hold the gains as German power prices decreased.

The market eagerly awaits clarity on future offset use in the EU ETS for post-2012. The European Commission's timetable to release new quality restrictions on the use of CERs is November this year. This is likely to impact the ongoing use of industrial gas projects (HFC's and other industrial gases) and may restrict issuance countries (away from China and India and towards Least Developed Countries and Africa). Last week, the EU confirmed that the rules would not apply retrospectively.

The case for the EU moving to a 30 per cent emission reductions target by 2020 has provided further support with the European Energy Agency (EEA) releasing data that shows the EU will comfortably meet its 8 per cent reduction target by 2012 due to the economic recession. Northern Europe supports the tougher target and enjoys widespread business support to drive investment in a low-carbon economy. However, the southern Europeans are opposed, as the recession has crippled their economies.

Source: December 2010 CER futures contract (CERZ10) settlement price, ICE, 18 October 2010