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European Carbon Trading Market goes into a Huge Slump on Greek concerns,post 2012 Kyoto uncertainity

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The European Carbon Trading Market which is the biggest cap and trade market in the world has gone into a monster slump with carbon credit prices having fallen to around 10 euros which is the lowest since March 2009 when almost every global asset had fallen to multi year lows.The trigger for the correction in prices is the future of the EUA scheme in which major carbon emitters in Europe are restricted to quotas and have to buy carbon credits if they exceed their limits.A huge amounts of United Nations CERs are sold into this market as they are allowed to to so.This has led to the mushrooming of a huge growth of carbon consultancies in India and China which help projects in obtaining these lucrative CERs.Note this has recently become highly controversial with a number of frauds happening in trading of these carbon credits.Top investment banks have been convicted of fraud and big sellers of CERs like the HFC producing companies have made ludicrous windfalls of hundreds of millions of Euros.Some of these companies have now started focusing in winning these CERs which are much more profitable than their core operations.

With the global talks on climate change failing and none of the major countries interesting in doing anything about global warming what will happen to the post 2012 Kyoto Framework which allowed the United Nations Clean Development Mechanism (CDM) is a big question.This plus the upcoming debt default/restructuring of Greece has thrown the entire future of carbon trading in Europe into major uncertainity.This has led to a 33% fall in the price of carbon credits in the last month as fear grips the major participants.Note in my opinion CDM and Carbon Trading are one of the worst thought out mechanism to control climate change and have given risen to profiteering and frauds and not much to tackle climate change.

Carbon offsets fall below 10 euros, new 2-year low

International carbon offsets fell below 10 euros per metric ton for the first time since March 2009 early on Monday morning, but traders were unsure whether carbon prices were poised to drift lower or stage a rally.

The ultimate fear is for the robustness of the whole EU project in the event of a possible Greek and other sovereign defaults, given that emissions trading is a creation of EU states.


Abhishek Shah

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