November 23, 2011 / 1:52 PM / 8 years ago

U.N.-backed carbon prices hit record low

LONDON (Reuters) - Benchmark U.N.-backed carbon prices fell to a new record low on Wednesday, taking a cue from a 7-percent drop in European Union carbon permits amid growing worries about a slowing economy.

Wind turbine generators are pictured in Desert Hot Springs, California July 11, 2011. REUTERS/Mario Anzuoni

By 1355 GMT, the front-year Certified Emissions Reduction (CERs) contract traded at a record 5.99 euros ($8.08), down 6.4 percent from the previous day’s settlement.

The CERS, which are derived from U.N.-backed carbon emission reduction projects in developing countries, are down more than 50 percent since the start of June as demand waned due to an abundance of carbon credit supply and prospects of slow growth.

The sharp drop in secondary CER prices has also affected share prices of Camco International and Trading Emissions Plc, two London-listed firms that invest in carbon emission-reduction projects.

Share prices in Camco were down 10 percent, while Trading Emissions shares were off 5.4 percent.

Benchmark European Union carbon permits called EU Allowances were down 6.5 percent at 8.51 euros. Earlier, they hit a fresh 33-month low of 8.45 euros.

“Selling is kicking in and there is not much buying going on,” said a carbon trader at a large European utility.

“If the economy turns worse and companies go bankrupt and countries go bust, nobody is going to care about global warming and emissions trading,” he said. “That’s the grim reality.”

The EU carbon market, the world’s biggest cap-and-trade scheme, is the 27-nation bloc’s main policy tool to tackle climate change. It covers more than 11,000 polluting power generators and industrial plants.

However, the low price of carbon alone is unlikely to spur new investments in low-carbon technologies.

Matteo Mazzoni, carbon analyst at Nomisma Energia in Italy, said market participants were losing faith, while the worsening euro-crisis could dampen efforts to tackle climate change.

“Inevitably, policy areas such as climate and renewables, which bring additional costs to industries and consumers, are now under question,” he said. ($1 = 0.7410 euros)

Reporting By Jeff Coelho; Editing by Anthony Barker

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