A reduction in available Certified Emissions Reductions (CER) and Emission Reduction Units (ERU) will also force the price of European carbon allowances (EUAs) up, said Point Carbon, despite a possible decrease in industry emissions as a result of the global economic downturn. The demand from these installations is expected to remain fairly stable, while expectations for the global supply side have today been adjusted downwards.

When there are fewer CERs and ERUs available on international carbon markets, the price of EU Allowances (EUAs), the tradable unit under the EU emissions trading scheme (ETS), can go up as companies which had intended to use project credits from CDM to be in compliance with their reduction targets instead have to buy EUAs or undertake costly internal reductions to comply. Point Carbon predicts that there will be 2215 Mt Clean Development Mechanism and Joint Implementation emissions reductions by the end of 2012. This is 535 Mt, or 19 percent fewer than its previous predictions published in August. The expected emission reductions are divided between 1936 Mt from CDM and 279 Mt from JI.

Point Carbon attributes the predicted reduction of 535 Mt fewer CERs and ERUs to several factors. The most important is the increasing strictness from the CDM executive board, which together with the effect of limited validation capacity results in reduced confidence in the success for some major CDM project types.