How to secure a good CDM deal at an early stage?

The CDM JI market these days is a sellers market. These Offsets (I hate the word Offset for some reason; probably because I have only thought of them as CDM/JI ) are valued anywhere from 2 to 16 Euros depending on at what stage of development they are.

An early stage project (before PIN, only at the pre-agreement level) could be captured at under 5 Euro.

But a Guaranteed CER ( the credit that is issued by a CDM project or ERU from the JI project) is above 16 and this is because the guarantor is someone that has arranged, for example, 10 million on something like delivery-versus-payment terms and can be fairly sure that he will get at least 50% of the ten million and can guarantee that half. (a crude example). Usually the bigger banking or financials that have entered the carbon space.

But to arrange a good project early, now that is the key. But how to do this? Everyone and their uncle is seeking early projects. I get calls because of my access to some of the less sophisticated markets in a variety of enterprises (emerging market, merchant wanker background). But all these aggregators are suggesting that they have something special that the other guy doesn't.

In truth, it really only takes a bit of knowledge on the type of projects that can reduce Greenhouse gases, the markets where it can be (or soon will be) applicable, and a good network in some economy in transition (well, mostly these) to be able to get a deal at an early stage. No it ain't simple, but some aspects are.

The main aspect is this: explain to the host (the company who has a location that can have GHGs reduced, captured) that they will make money and then get them to sign away their future at 2 Euros.

Alrighty, I am a huge cynic.

The interesting thing about these Offsets (I hate that word) is that the project developers are now being courted like the local pygmy chief, showing him shiny objects, marvelous gifts and even telling him he is so tall. In a few years, these guys will be on the other end of the stick I think, and it will be a buyers market.

Its a wierd market. The idea of selling a project to a buyer has so many variables. And usually they want it sold fairly quickly. Some sellers ask for surprisingly high prices. Some ask for up front payments. Buyers ask for bank guarantees (which is hard for smaller developers). Some ask for financing on the PDD work (which can be pricey).

The buyers want approved methodologies, they want bigger discounts since the projects won't deliver the amount of credits estimated. Delivery dates won't be on time, there might be some subsidies that will affect the local market, the issue of double counting has to be clarifies... on and on...

But what is good, is that .. for now at least... the buyers are all really quite nice people. It reminds me of another emerging market where all the fund managers were so nice and happy to speak to you, and then later, when the market was over serviced, they would be cruel and ask for special favours. I can see that happening.

Oh well, it really is a financial market now. Not to be confused with a green market, no way.

Nuclear Bombs Could Ruin Your Future

Here’s a pleasant news story for your sunny Tuesday morning. It was sent out by the Carbon reporter at Bloomberg.

A nuclear war involving 100.A nuclear war involving 100 Hiroshima-size bombs would open a massive hole in the earth's ozone layer, exposing life to dangerous levels of the sun's rays, a new study shows. Smoke caused by the atomic explosions would trap heat in the stratosphere and lead to the deterioration of more than 20 percent of ozone globally, according to a study published today in Proceedings of the National Academy of Sciences. The findings suggest a more severe ``nuclear winter'' resulting from a massive nuclear war than was predicted in the 1980s.

Link here: Earth's Ozone Would Be Largely Destroyed in Nuclear Conflict

But what I do not understand is

1) Wouldn’t the sudden shut-down of the world’s economies and industrial production assist in turning back the clock since only a fraction of the people would be alive? and um, “nuked back to the dark ages”

2) Who would care about getting killed by the weather when your teeth are falling out of your gums and you are fighting each other for that can of pork and beans.

Gored Me!

 

Yes, It Was An April Fools Joke. Gotcha! (Got Me, Actually)

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 Re Seen on Grist.org today. Below

A Gore April Fools Joke?

 

 Seen on Grist.org today. But guess what? The link goes to nowhere.

McCain Statement

I wonder if other Europeans get the same feeling as I do when they read Climate Change comments from the US politicos. Its a feeling that they don’t really understand what the trading issue is all about.

 

Sure, many politicians on every continent can be accused of the same thing. But something about the American view really is always so… unsettling. Okay, okay, you might say they have many issues to comprehend and speak intelligently about during the campaign season, and they cannot be blamed for muttering the blandest and acceptable comments. This is clearly understandable. Climate Change can be taught, but the many issues about trading? Caps? Allocations? The inaccuracy of credit production? The quelling of economic growth?

 

When I hear Hillary, Obama, and McCain speak, they seem so far from the Gore point of view. (Where is Al, anyway? Has anyone seen him? He’s not returning my calls).

 

Take a look at this one by McCain. (From PointCarbon.com a pay site)

 

20.03.08    McCain pledges commitment to reaching global climate agreement

US presidential hopeful John McCain on Thursday expressed his commitment to reaching an international agreement on climate change – an agreement that would include large developing countries, such as China and India.

“I am confident that we can reach a global agreement that would include China and India. I believe it is a compelling issue for the world’s environment, and I am committed to it,” the Republican senator and presidential frontrunner told reporters in London, following a meeting with UK Prime Minister Gordon Brown.

 

Considering that he will be the next president, it is a bit worrying.  (I say this because he is ahead in the polls if he faces either Obama or Hillary – and I am counting on them not agreeing to a joint ticket. Although, it might be a surprise if Gore comes back to be Vice President, or some other similarly surprising name).

 

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Why Many Different Credits Would Be Better

In the last few weeks there have been a few Carbon market 'firsts' announced.

 

The first UN Credits traded on NYMEX (RNK and Vitol), the first ECX UN Credit trade (TFS and Eneco), the first RGGI Auction 'announced' (New England states), and even the first CER deliveries to the Swiss Registry (by a bunch of arrogant Dutch fools).

 

What is more interesting about these events, aside from the PR value, is the filling in of the gaps in the curve.

 

Since the EUA has been issued, it has maintained it predominance in terms of liquidity and, dare-I-say-it, reputation. However, in my opinion we will soon we will see it being replaced as the benchmark as more CERs come to the market. The positon in the market of the other credits, as they become more liquid, will be similar to that of junk bonds.

 

Thats right, the CER will be the 30 year bond of the Carbon world and all others will gague their value against them.

 

o        The ERUs, the retarded sister of the CER, will perhaps trade closer to CERS.

o        The VERs and VCUs will be 'credits in waiting' like the "always the bridesmaid, never the bride".

o        The RGGI credits will be the exclusive toy of the posh New England players and market churners of White Plains, NY (like that Sulfur thing).

o        The California Credits will be owned by Stephen Speilberg and Tom Hanks.

 

About the only real value of an international and basis-risk play market is the amount of specialists employed due to the complicated nature of the various markets. With credits popping up all over the place, there will be plenty of jobs for those soon-to-be unemployed equity traders. 

 

 

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Bearish Markets and the Carbon Market?

    Right! Here we are folks in the beginning of a healthy correction/bear market. What does it mean for the Carbon Market?

    I want your views. What do you think? What types of influence do you see? List them for me in one-liners and I will publish them in the next weeks.
For example. With the coming lay-offs similar to what followed the 1987 collapse (Yes, i am THAT old) I expect quite a few financial market layoffs.This might bleed into the Carbon market as potential investment money might dry up.  But in this example we can say that there is a major effect and a follow on. Namely, if investment money dries up, another 20 things can be said to be connected. So list them for me in this way:

I expect investment money to dry up and a lot of people will be laid off. (Feel free to use the first segment over and over again, i.e., "I expect investment money to dry up and (therefore) .."

More examples (actually based on my views)

I expect the issue of global warming will move further down the food chain because employment will take higher precedence.

I think that investment into newer technologies will suffer since companies will reduce R&D in favor of shoring up the failing share price.

  Let me have your comments.

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Messenger on the move. Text MSN to 63463 now!

Citigroup Hires Edward From Shell

This is actually quite an interesting story. What I want to know is if there is enough room for his ego in Citi. heh heh

Citigroup Hires Edward From Shell for Emissions Trade (Update1)

By Mathew Carr and Lars Paulsson
    Dec. 4 (Bloomberg) -- Citigroup Inc. hired Garth Edward
from Royal Dutch Shell Plc to trade carbon dioxide permits and
United Nations-approved emission credits as the bank expands its
energy and commodities business.
    Edward will be head of emissions markets, reporting to Paul
Mead, managing director of power, gas and emissions, spokesman
Jeffrey French said today by telephone from London. Edward
headed environmental products trading at Shell for six years,
Citi said today in an e-mailed statement.
    Citi, based in New York, earlier this year hired Alan
Bannister and Heidi Forbes to trade carbon dioxide, the
statement said. It hired Paul Dawson from Barclays Capital to
handle policy and regulatory affairs.
    Citi, the largest U.S. bank by assets, said in May it plans
to make loans and investments of $31 billion in alternative
energy sources linked to climate change, bringing its target for
``green'' projects in the next decade to $50 billion.

--Editor: Stephen Cunningham, Will Kennedy.

sox