Types of CERs

There are three main types of CERs available in the market:

• Issued CERs – these are already generated and issued to projects for emissions abatement already undertaken.
  
  Due to the low-risk involved with issued CERs, issued CERs command a premium to forward streams of CERs, which have yet to be generated and as such carry more risk.
  
  At present, many issued CERs fall into the 'prompt start' category, where in order to kick-start the CDM market, projects were allowed to claim credits for emissions abatement from 1 January 2000 while the eventual rules and regulations were still being finalized in climate negotiations
  
  However, such early projects must submit requests for registration by 31^st March 2007, in order to qualify for these retroactive credits. This deadline has already been extended once in order to afford more time for project developers. The registration fee must also be paid by 31^stJan 2007, with the required project documentation submitted in time for uploading to the UNFCCC website by 15^thFeb 2007.

• Forward streams of CERs – these are credits yet to be generated by projects that are typically under construction, but which are expected to come online in Phase I of the Kyoto Protocol (2008-2012). Such projects may sell expected volumes of CERs throughout their chosen crediting period, with payment by Buyers upon delivery of CERs at an agreed future date, in order to secure a revenue stream. Transactions involving forward streams of CERs are referred to as forward contracts, where a signed agreement binds the Buyer to pay the Seller a pre-arranged amount upon delivery of the CERs at a future date.

• Secondary Market CERs – this refers to CERs which are offered with a guarantee of delivery by a rated entity such as a bank or fund. As all project and delivery risk is borne by this entity, as opposed to a standard 'off take contract' with a project, secondary market CERs often command a higher price than those bought directly from a project.