Trading of UN-backed carbon credits ground to a halt on Tuesday, due to a loophole that means used credits can find their way back to the market. Exchange prices were heard plummeting to EUR1.00/tonne of CO2, while the effect in the over-the-counter market was to paralyse trading.
Confidence in the carbon market has been blasted by news that EU countries can re-sell these credits in the international market and make a profit, data from market analysts ICIS Heren shows.
Prices of this kind of UN-backed carbon credit – certified emission reductions (CERs) – are now falling, while trading volumes have almost dried up.
The price of UN carbon credits dropped to EUR11.60/tonne of CO2 in the traded over-the-counter market on Tuesday afternoon, compared with prices above EUR12.00/tonne of CO2 last week.
For companies that are obliged by EU law to buy carbon credits to comply with emissions targets, government-led carbon credit recycling means they risk buying a worthless asset.
The reason is that the EU only allows CERs to be submitted once, to avoid double-counting of emission reductions.