REFILE-UN carbon offset market grows as exchanges rush in

(inserts dropped word 'that' in paragraph 10)

By Michael Szabo

LONDON, May 29 (Reuters) - Trade in U.N.-approved carbon
emission offset credits under the Kyoto Protocol is quickly
becoming mainstream as exchanges looking for a piece of the
action rush into the still nascent market.

The Clean Development Mechanism, a trading scheme under the
United Nations' Kyoto Protocol, allows rich nations to invest in
clean energy projects in developing countries and in return
receive Certified Emissions Reduction (CERs) which they can sell
for profit or use to meet emissions targets under Kyoto.

Trade in CERs more than doubled to $13 billion last year,
according to a World Bank report published earlier this month.
[ID:nL07564380]

This year marks the beginning of Kyoto's first commitment
period, which runs to 2012, as well as the first year that CERs
will be used towards compliance targets.

Launching their own CER futures contract on June 2, France's
BlueNext, a joint venture between NYSE Euronext and Caisse des
Depots, will join a crowd of exchanges vying for market share.

London's European Climate Exchange, Norway's Nord Pool,
Germany's EEX, India's NCDEX and the U.S.'s Green Exchange and
Chicago Climate Exchange have all launched their own CER futures
in the past year. Contracts settle in December of each year.

Dutch exchange Climex also trades CER spot contracts, and a
slew of brokers offer over-the-counter CER trading for clients.

CER prices, which are closely linked to European Union
Emissions Trading Scheme credits (EUAs), have gained nearly 25
percent since January.

CERs for delivery in December 2008 closed at a 5-month high
of 17.68 euros a tonne on Wednesday, according to the Reuters
CER Index <CER/RTR>, which takes into account both broker and
exchange prices.

U.S. CLIMATE BILL

Much of this rise can been linked to higher oil and gas
prices, though a downward revision by the UN of CER supply over
the next five years coupled with a devastating earthquake in
China that may have damaged several CER projects may have also
altered market fundamentals, said Emmanuel Fages, a carbon
analyst at investment bank Societe Generale (SOGN.PA).

Fages said forecast demand also looks to increase with the
inclusion of CER importing into a prospective U.S. carbon
emissions trading bill, going before the Senate next week.
[ID:nN23288813]

"The revised version of the Lieberman-Warner climate bill -
which aims to set a cap and trade system to cut U.S. carbon
emissions 70 percent by 2050 ... could boost CER demand by
250-300 million a year in the U.S. alone," Fages said in a
report.

CERs are also increasingly being used as voluntary offsets
for companies looking to cut their carbon footprints.

Accusations of poor quality and double-counting have
frequently plagued the voluntary emissions reduction (VER)
market, prompting companies to seek U.N.-approved CER credits
instead.

Arabic financial television channel CNBC Arabiya, the latest
firm to use CERs to offset emissions, said on Thursday it would
purchase around 180 tonnes of CERs annually from clean-energy
project developers Carbon Capital Markets.

Below is a list of exchanges that trade CERs.

EXCHANGE COUNTRY REUTERS RIC CODE*
BlueNext France N/A
Chicago Climate Exchange U.S. <0#ECER:>
Climex Netherlands N/A
EEX Germany <0#FCER:>
European Climate Exchange UK <0#CERE:>
Green Exchange U.S. <0#CCR:>
NCDEX India <0#NCCR:>
Nord Pool Norway <0#CER:>

*NOTE: Real-time prices from the above exchanges may be
fee-liable.

For a comprehensive daily list of CER prices and additional
analysis on the carbon markets, go to
www.reutersinteractive.com
(Editing by James Jukwey)