Archive for January 25th, 2012

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Ukraine to resume Carbon Credit trading

January 25, 2012

It seems the powers that be have decided to reenter the Carbon Credit trading market after a 2 year absence following a complaint from Japan about breaches to the Kyoto Protocol and the funds it paid for AAU’s from Ukraine apparently not going into strictly environmental budgets as per contracts here.

Yes of course Ms Tymoshenko is being investigated for that as well, although there really seems little point as if things were not where they should be found on the accounts, then they were put right fairly quickly.  No financial harm done, just embarrassment for Ukraine when another sovereign nation inquires why Ukraine is breaching a contract.

At the time that issue was brewing it is fair to say I was close enough to the periphery of this trade to know what was going on.  Indeed I had UK buyers for Ukrainian Carbon Credits wanting an introduction.  All Ukrainian Carbon Credit trading ceased abruptly and completely about 6 weeks prior to matters becoming public knowledge and headless chickens were running around Kyiv trying to work out what to do and what had happened when Japan initially (and quietly) raised the issue.

Anyway, that was then and this is now.  Ukraine has now decided to reenter the Carbon Credit market once again and is prepared to sell off its excess AAUs, CERs, CDMs, ERUs, and all the other wonderful 3 letters carbon credit formulas and derivatives that come from AAUs.

To be honest Ukraine couldn’t do so before as when the international experts went through the Ukrainian carbon books following the Japanese incident, Ukraine was banned from selling until the books resembled reality.  A further check from international experts has now allowed Ukraine to sell once more.

Of course economically it is in Ukraine’s interest to market its unused carbon credits to boost the budget funds as well as send a political message that the international experts are now happy that what Ukraine says and sells is actually based on some form of reality.  Generating a legitimate trade as soon as possible and putting the stain of recent events behind it seems like a reasonable thing to do, particularly when the EU Energy Policy will continue to have Carbon Credits at its core until 2050.

All very good, however the Carbon Credit market it not doing particularly well.  That is not to say the market is not working, it is, but the prices of such credits are at an all time low.  Ukraine reentering the market with even more assorted credits will do nothing by drive down the prices even more as supply already outstrips demand.

A quick telephone call to the Chief Carbon Credit Trader of a UK entity who was initially looking to buy Ukrainian Carbon Credits  a few years ago, informs me that it is likely to be close to 2020 before demand overtakes supply once again.  Not a particularly good thing given that Carbon Credits and the need to buy them was supposed to act as a deterrent to make polluters go for carbon capture technologies as a cheaper option than Carbon Credits.

One assumes that governmental targets for national CO2 emissions will be under pressure if Carbon Credits are going to prove far cheaper than carbon capture technologies for the next 8 years.  The reentry of Ukraine and its available credits in the market can only put further downwards pressure on the price of Carbon Credits and thus less incentive to literally make polluters clean up their act.

You could very well question the credibility of a scheme where supply outstrips demand when the entire premise is that supply forces polluters to go for carbon capture rather than pay very high prices for Carbon Credits instead.  One for the policy makers to think about.

Anyway, Ukraine is back in the market with an audited and believable (according to external experts) inventory.  Let’s see if there are any takers and what price is agreed.

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