In 2013, two major changes with regards to the EU Emissions Trading System (EU ETS) will take place: the majority of emission allowances will be allocated via auction, and certain Certified Emission Reduction (CER) carbon credits will be omitted from trading in the EU ETS. This second provision is one of the main reasons for the falling prices of CERs, even though it refers only to the CERs generated from certain carbon offset projects.

The problematic CERs are issued for projects involving the destruction of industrial gases and there are doubts whether those projects actually deliver net reduction in greenhouse gas emissions as it is questionable as to whether they answer to the ‘additionality requirement ie this process would take place outwith the EU ETS. As those “grey” credits will not be tradable in the EU ETS in the future, there is an oversupply of CERs. This is perhaps one of the reasons why analysts are currently slashing their CER price forecasts, as reported by Carbon Finance. In any case, the approaching Phase III of the EU ETS will further influence the prices of CERs.

There is, however, also a reason for guarded optimism; while the CER prices in general are falling at present, the CERs generated from greener carbon offset projects might become a new, more valuable type of carbon credits.