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Russia issues 5.24m ERUs in March

12 Apr 2012 14:33:08 | edcm

Prices of emission reduction units (ERUs) shed almost a quarter of their value over the course of March, a trend that may be in part due to the latest push by Russia.

The Russian government has issued 5.24m ERUs since the beginning of March, according to figures provided by the country's national carbon registry.

The ERUs, issued under the Kyoto Protocol's Joint Implementation (JI) programme, which is overseen by the United Nations Framework Convention on Climate Change, are tied to projects approved by Russia's Ministry of Economic Development.

Countries can surrender credits from Clean Development Mechanism (CDM) and JI projects to meet their Kyoto Protocol obligations. The credits are also accepted under the EU's emissions trading system (ETS), providing demand from the private sector.

Latest issuance

Three of the JI projects are new power stations sponsored by Finnish utility Fortum. Two are combined heat and power (CHP) plants and the other is a gas-fired plant, according to the registry data.

A Fortum spokeswoman said the projects will have a combined installed capacity of 1.05GW of electricity and generate a total of 2.36m ERUs. At the ICIS Heren ERU spot closing price of €3.70/tonne of CO2 equivalent (tCO2e), this amount would be worth around €8.7m.

The issuance may have helped to put further pressure on already weak ERU prices. The price of the benchmark ERU, the December 2012 contract, averaged €3.95/tCO2e over the course of March. However, this also marked a drop of more than 21% from the first day of the month to the last.

The Russian Ministry of Economic Development could not be reached for comment.

Projected issuance

Russia issued 23m ERUs in 2011, the carbon registry confirmed. The country is potentially the largest source of these credits, but red tape is frequently blamed for delays.

The registry has previously said that Russia will be offering a total of only 300m carbon credits to JI projects before 2013. This an estimate of the maximum number the country could issue before phase III of the EU's ETS begins.

The UN Environment Programme estimates that 106m ERUs will be generated across the JI programme in 2012. The average monthly issuance of ERUs for the past six months was 12m.

The purpose of JI is to encourage investment in emissions reductions in developed countries that have signed up to the Kyoto Protocol - so-called Annex I countries.

The scheme has particularly been used in what the Kyoto Protocol calls economies in transition - Russia, Ukraine and other former Eastern Bloc states. KB

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