24 Jan 2011 01:01:51
Failed announcement creates uncertainty
Carbon traders criticise European Commission’s failed announcement on carbon credits for damaging investor’s confidence.
The Carbon Markets and Investors Association (CMIA) has widely criticised the European Commission's change in its decision to ban the use of industrial gas offset credits in the EU’s emissions trading scheme (ETS), saying that the uncertainty could restrict the availability of credit for carbon emissions reduction projects.
The EU’s climate change committee announced on Friday that it had voted to ban the use of offset credits derived from projects to reduce HFC 23 and nitrous oxide, with effect from May 2013. The announcement followed a previous statement that said the controversial industrial gas credits would be banned from 1 January 2013, which was then cancelled half an hour later.
The failed announcement increased the price of carbon to a three-month high, before the correction resulted in the price falling back to €10.56, which angered carbon traders, many of whom lost money as a result of the changes.
European carbon registries will open after measures to improve cyber security are taken
The CMIA accused the commission of politicizing the carbon market and undermining investor confidence. The group acknowledged there were "valid concerns" about industrial gas-based credits, which have been accused by environmentalists of being issued by projects that are "gaming" the carbon market by producing carbon emissions for the main purpose of destroying them in order to gain credits.
However, the CMIA warned that changes to the rules governing the EU ETS would damage investor confidence in the carbon market and urged the commission's climate change committee to provide advance notice of any future changes that are being considered. The CMIA said "The frame of reference for future debates needs to be stated clearly, and political decisions need to be characterised as such”.
The failed announcement completed a bad week for the EU ETS after a series of cyber attacks forced the EU to close carbon registries across Europe, bringing a halt to spot trading in the carbon market. The registries are now expected to re-open over the next few weeks, but only after measures are taken to improve cyber security.