Indian cos wait for higher CER prices

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: Indian project developers are holding back already-issued certified emission reduction (CERs) for sale in the near future at higher prices. Some respondents have price expectations in the range of Euro 12-20, says a new survey by Emergent Ventures India, a leading climate change mitigation consultancy. Currently, the prices hover around Euro 12 against Euro 20 last year.

The survey, Carbon Price Expectations of CDM Project Developers in India, covered 64 projects over a period of one and a half month from April to May. It included projects from the biomass sector (31%), hydro (23%), wind (20%) and electrical efficiency (17%). Besides, projects on landfill gas and fossil fuel switch were also included.

Detailed findings of the survey show that large companies are holding on the already-issued CERs. Smaller companies typically need money from carbon credits to run their operations. The owners of 41% of the projects expect the prices to be in the range Euro 15-20 in December 2009, whereas 35% are more realistic with expectations of Euro 12-15.

The most important factor affecting prices is considered to be the lack of clarity on Clean Development Mechanism (CDM) beyond 2012. An update on the possibility of CDM beyond Kyoto period and market outlook would help the developers understand the market better.

Also, the current economic crisis seems to be pushing the prices down and it is perceived that there is reduced production in developed countries, leading to fewer emissions, which in turn reduces the demand for carbon offsets.

It’s followed by the concern about the current economic crisis. Procedural changes by UNFCCC and recently adopted stringent measures for the issuance of credits have been also affecting project developers.

High perceived cost of CER transactions and tedious procedural requirements figure low down on the importance factor.

Large suppliers like China are transacting CERs at relatively lower prices through future contracts. This is putting a downward pressure on prices of CERs. There is a common consensus that India will also accept greenhouse gas emission targets in the future, though not immediately, and this has also had some effect on prices of carbon offsets.