Carbon

Volume 13 Issue 4

CDM Projects fail to deliver Credits as United Nations Tightens Approvals

Recently the Wall St Journal wrote about stunning write downs on EcoSecurities.

In their response EcoSecurities executives responded as follows:

Starting last year, the regulators were "getting more and more obsessed with detail," raising questions that weren't relevant to projects' environmental integrity, Mr. Moura Costa recalls. He and other EcoSecurities executives expressed frustration to U.N. officials. The company's message, he says: "This is ridiculous."

Last fall, concern about the U.N.'s more activist role boiled over at EcoSecurities' headquarters here in Oxford. The company uses a computer database it calls "Carbo" to monitor the rate at which its projects produce credits. As the U.N. clamped down, Carbo's "siren was going off," Mr. Stuart recalls.

In October, EcoSecurities executives gathered in the boardroom to confront a striking reality: In the space of months, the entire landscape of their industry had changed. Poring over their biggest projects, they debated how much of their business would need to be simply written off.

A big write-down "would have significant consequences to the company," Mr. Moura Costa recalls warning.

Ultimately, on Nov. 6, the company announced its write-off of 23% of the credits it had promised to deliver. Its stock fell 47% that day.

Since then, the stock has fallen further. It closed Friday on the London Stock Exchange's AIM at 84 pence, giving it a market capitalization of £94.9 million.

Last month, EcoSecurities, which has 300 employees in 30 offices world-wide, reported a widened loss for last year of €45 million on revenue of €7.2 million.

EcoSecurities' largest shareholder, other than the two founders, is banking giant Credit Suisse, which bought an approximately 9% stake last summer when the stock was near its peak. Since then, Credit Suisse has lost two-thirds of its $60 million investment.

"We don't believe the market is valuing the stock fairly," says Paul Ezekiel, who heads Credit Suisse's carbon business and who sits on EcoSecurities' board.

Given the lack of clarity in the U.N.'s rules, it's not fair to fault EcoSecurities for trying to maximize the number of credits it produces, he says. "It's like saying the speed limit's going to be between 50 and 90. So do you drive 55 or do you drive 85?"

Commentary

This provides an interesting insight into the availability of CER’s (certified emissions reductions) for the EU ETS and other markets. The article suggests that in some cases supply of credits from a project was over estimated by 50% meaning a third less credits will come to the market than expected!

It also raises the issue of the quality and veracity of the recent sale of so called ‘gold standard’ CER’s as a New Zealand first last month. The buyer Bell Gully must have researched the credits thoroughly one would have to assume.

EU Price Update

All allowances continued to firm in the last month as 2012 prices headed towards 29 Euro before easing.

www.cantorco2e.com

Beer – the Next Victim of Global Warming

Wellington, New Zealand - Climate change in coming decades will put the squeeze on beer supplies by impeding the production of a key grain needed for the brew - especially in Australia, a climate scientist warned on Tuesday.

Jim Salinger, a climate scientist at New Zealand's National Institute of Water and Atmospheric Research, said climate change likely will cause a decline in the production of malting barley in parts of New Zealand and Australia. Malting barley is a key ingredient of beer.

"It will mean either there will be pubs without beer or the cost of beer will go up," Salinger told the Institute of Brewing and Distilling convention.

Similar effects could be expected worldwide, but Salinger spoke only of the effects on Australia and New Zealand. He said climate change could cause a drop in beer production within 30 years, especially in parts of Australia, as dry areas become drier and water shortages worsen.

Barley growing parts of Western Australia, South Australia, Victoria and New South Wales would likely be harder hit than growing areas in New Zealand's South Island.

"Most areas in Australia where malting barley is cropped are likely to experience producing declines," he said.

"It will provide a lot of challenges for the brewing industry," even forcing breweries to look at new varieties of malt barley as a direct result of climate change, Salinger said.

New Zealand and Australian brewer Lion Nathan's corporate affairs director Liz Read said climate change already was forcing the price of malted barley, sugar, aluminum and sugar up.

Read said as well as climate change, barley growers were competing with other forms of land use.

In the past two years pressure on cropping land in New Zealand had increased with the expansion of the dairy industry, fuelled by major international dairy commodity prices rises.

Draft Forestry Regulations for NZ ETS

The NZ Government – through the Ministry of Agriculture and Forestry – will soon begin consultation on the draft forestry regulations that sit under the NZETS. Regulations provide more detailed guidance about how a given piece of legislation will operate in practice and about the “machinery” for forest owners to follow.

The draft forestry regulations cover two aspects – established before 1990 (pre-1990 forests), and forests established after 1989 (post-1989 forests). Unless exempted, all pre-1990 forests will be compulsorily included in the NZ ETS, whereas owners of post-1989 forests can chose to participate.

The draft regulations for pre-1990 forests were publicly released in February – at that stage for information only and to better inform the submissions to the Select Committee about the legislation.

MAF will shortly be calling for submissions on the draft regulations for both pre-1990 and post-1989 forest land. When this consultation begins, the draft regulations, along with a commentary explaining what the regulations mean and how to make a submission on them, will be distributed to you electronically via this Sustainable Forestry Bulletin. They will also be available from the MAF website: