Carbon Trading Paralysed by EU Loophole

LONDON, March 17, 2010 - Trading of UN-backed carbon credits ground to a halt on Tuesday, due to a
loophole that means used credits can find their way back to the market.

Exchange prices were heard plummeting to EUR1.00/tonne of CO2, while the
effect in the over-the-counter market was to paralyse trading.

Confidence in the carbon market has been blasted by news that EU
countries can re-sell these credits in the international market and make a
profit, data from market analysts ICIS Heren shows.

Prices of this kind of UN-backed carbon credit - certified emission
reductions (CERs) - are now falling, while trading volumes have almost dried
up.

The price of UN carbon credits dropped to EUR11.60/tonne of CO2 in the
traded over-the-counter market on Tuesday afternoon, compared with prices
above EUR12.00/tonne of CO2 last week.

For companies that are obliged by EU law to buy carbon credits to comply
with emissions targets, government-led carbon credit recycling means they
risk buying a worthless asset.

The reason is that the EU only allows CERs to be submitted once, to avoid
double-counting of emission reductions.

If the CERs that national governments have sold on the international
market return to an EU buyer - through normal re-trading - this buyer will
not be able to use the credits for compliance under the EU emissions trading
scheme.

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    Contact details, for more information and interviews:
    Isabel Save
    Editor, European Daily Carbon Markets
    ICIS Heren
    Tel: +44(0)20-7911-1942
    E-mail: isabel.save@icisheren.com

Contact details, for more information and interviews: Isabel Save, Editor, European Daily Carbon Markets, ICIS Heren, Tel: +44(0)20-7911-1942, E-mail: isabel.save at icisheren.com