LONDON - Primary market prices for carbon offsets generated by clean energy projects under the Kyoto Protocol fell to their lowest level since July, analysts IDEAcarbon said late on Friday.
Prices for the U.N.-approved Certified Emissions Reductions (CERs) generated by advanced-stage projects, which present the lowest delivery risk, fell to 10.51 euros ($15.80) a tonne, 1.57 euros below market resale rates.
Average prices across all risk scenarios for pre-2012 delivery CERs dropped to 8.99 euros.
CER prices are closely correlated to European Union carbon permit prices. Benchmark EU permits hit a 5-month low of 12.47 euros last Wednesday on increased selling pressure from industrial firms and softer energy prices.
Through the $6.5 billion primary market for carbon offsets under Kyoto's Clean Development Mechanism, companies can invest in clean energy projects in emerging nations like China and India, and in return receive CERs which can be used toward greenhouse gas emissions targets or sold for profit.
Primary CERs are now at their lowest levels since July 9 while secondary market prices, finishing last week at 12.08 euros, gained 4.2 percent since last Tuesday.
CER prices were also pressured by investor concerns over upcoming climate talks, IDEAcarbon said.
The buy-sell ranges for all CER risk scenarios except (post-2012 delivery) widened again this week ... a sign that participants are beginning to look away from commercial negotiations toward the political talks, IDEAcarbon said.
Delegates from over 190 nations will meet at a U.N.-backed climate summit in Copenhagen next week to hash out a successor agreement to the Kyoto climate pact, which expires in 2012.
The talks have run out of time to settle a legally-binding global deal after arguments between rich and poor nations about who should cut emissions, by how much and who should pay.
The CER market has yet to draw any solace from the statements from the United States and China, outlining the positions they intend to take to Copenhagen, IDEAcarbon added.
Last Thursday, China unveiled its first firm target to curb greenhouse gas emissions, a day after the United States pledged to cut its 2005 emissions by 17 percent by 2020.
China, the top emitter of greenhouse gases from human activity, said it would cut the amount of carbon dioxide produced per unit of GDP by 40 to 45 percent by 2020, compared to 2005 levels.
IDEAcarbon said it expects the primary CER market to quiet ahead of the climate talks and as the holiday season approaches.