Article

Weak carbon credit prices drag on wind power prospects

Unless advanced economies adopt more ambitious reduction targets and are willing to use CDM to fulfill them, demand for carbon credits cannot easily recover. But uncertain economic and industrial production outlook in developed economies and a huge oversupply of carbon credits do not bode well for the market.

China can do a lot to shore up an ailing industry but as long as a sector is heavily exposed to global markets, government support is generally ineffective. Shipping is a well-known example, wind power less so but just as noteworthy.

Trade in carbon credits is an important source of profit for wind farm operators. Upstream equipment makers in turn depend on wind power companies for new orders.

Top wind power firm Longyuan (00916.HK) booked more than 1 billion yuan (US$160 million) of other net income in the nine months to September. This primarily consisted of sales from carbon credits, a sizable amount compared with 1.7 billion yuan of net profit for the period.

The bad news is carbon credit prices have been plummeting. EU Allowances, a form of carbon credits traded under the European Union's Emissions Trading Scheme, fell to a record low in January after several months of rock-bottom prices, according to reports.

Also, demand for CERs (certified emission reductions), carbon credits from emission reduction projects in developing countries and one of the core types of such credits sold by mainland wind power firms, has been sliding, crimping prices.

CDM... more [truncated due to possible copyright]  

China can do a lot to shore up an ailing industry but as long as a sector is heavily exposed to global markets, government support is generally ineffective. Shipping is a well-known example, wind power less so but just as noteworthy.

Trade in carbon credits is an important source of profit for wind farm operators. Upstream equipment makers in turn depend on wind power companies for new orders.

Top wind power firm Longyuan (00916.HK) booked more than 1 billion yuan (US$160 million) of other net income in the nine months to September. This primarily consisted of sales from carbon credits, a sizable amount compared with 1.7 billion yuan of net profit for the period.

The bad news is carbon credit prices have been plummeting. EU Allowances, a form of carbon credits traded under the European Union's Emissions Trading Scheme, fell to a record low in January after several months of rock-bottom prices, according to reports.

Also, demand for CERs (certified emission reductions), carbon credits from emission reduction projects in developing countries and one of the core types of such credits sold by mainland wind power firms, has been sliding, crimping prices.

CDM (clean development mechanism), a scheme under the Kyoto Protocol that allows industrialized countries to invest in projects that reduce greenhouse gas emissions in developing countries in order to earn emission credits, gave rise to the CER market.

Unless advanced economies adopt more ambitious reduction targets and are willing to use CDM to fulfill them, demand for carbon credits cannot easily recover.

But uncertain economic and industrial production outlook in developed economies and a huge oversupply of carbon credits do not bode well for the market.

Spooked by the downward spiral, with market conditions the complete opposite of the 2007-2008 boom, many carbon traders have left or are seriously considering leaving the business, 21st Century Business Herald reports.

In recent months, wind power shares have rebounded, some from distressed levels. Hopes of fresh supportive policy for the new energy sector are high. If it materializes, it will be good news but the chill from a weak carbon credit market will continue to be felt for a while.


Source: http://www.elp.com/news/201...

MAR 11 2013
http://www.windaction.org/posts/36510-weak-carbon-credit-prices-drag-on-wind-power-prospects
back to top