Barclays Capital cuts U.N. carbon price forecast for first-half

LONDON (Reuters) - Barclays Capital analysts reduced their price forecast for U.N.-backed carbon offsets for the first half of 2011 to 13 euros a tonne from 14.5 euros due to a recent surge in issuance, the bank said on Monday.

Under the U.N.’s Clean Development Mechanism (CDM), companies can invest in carbon-cutting projects in emerging economies, and in return receive offsets called certified emissions reductions (CERs) which can be used against their own emissions.

CER issuance broke the 500 million mark on Monday after 1.3 million were awarded to a project which destroys the potent greenhouse gas HFC-23, Point Carbon reported.

The total number of CERs issued by the U.N. to clean energy projects soared to 502 million after the issuance of 1.3 million to an India-based HFC-23 project on Monday swelled the total.

The latest issuance comes on the back of a bumper issuance last week when some 3.5 million CERs were awarded, setting the first month of the year on course for a record high in issuances.

As a consequence, the benchmark CER contract fell to 11 euros a tonne on Monday, its lowest level since February 2010.

CER issuance is likely to remain high in the coming weeks with 46.8 million metric tons of CERs in the queue for requesting issuance, Barclays Capital said.

“With all of that (and some more) expected to be issued in Q1, CER liquidity in the coming months should remain high and we forecast that 200 million (metric) tons of CERs will be issued over 2011,” the analysts said.

Such high issuance is only likely to be met by greater demand from the second quarter, making it likely that CER prices will remain in the 11-12 euro range in the coming weeks.

Reporting by Nina Chestney; Editing by Anthony Barker