Brazil’s Mercantile and Futures Exchange (BM&F) will begin carbon trading
in
São Paulo on September
27, auctioning CER carbon offsets from projects under Kyoto’s Clean Development
Mechanism (CDM).
Trading will kick off with 808,000 CERs up for sale from a landfill methane
capture project run by the
São Paulo city administration, with a minimum price to be announced the day
before the auction. The auction rules set a minimum bid price at 60 per cent of
the average of December 2008 EUA settlement prices on the European Climate
Exchange over the ten days preceding auction day.
The city administration is reported to be seeking $US30 million from the
auction sale but if correct this appears overly optimistic, requiring $37 per
CER. Current prices for issued CERs are around $20.
BM&F says the exchange will create a market for lots of small parcels of
credits generated from small-scale projects producing less than 100,000 CERs.
There is a backlog of such credits with their issuers having difficulty selling
small volumes by direct negotiation with buyers in what’s called the
‘over-the-counter’ market.
The exchange has the backing of the city administration which says the need
to reduce emissions from growing fossil fuel energy demand in Brazil will
underpin growth in emissions trade. Landfill projects in
São Paulo, capturing methane from
domestic waste for generator fuel, are expected to supply 10 per cent of the
city’s electricity by 2013 and produce 5.7 million CERs.
Bloomberg 22/8/07, Climate Change Corporation 2/8/07