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| Home » Carbon management » Certified Emission Reductions (CER) |
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Certified Emission Reductions (CER) |
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Certified Emission Reduction (CERs) can be referred to as a technical term used for the output of Clean Development Mechanism (CDM) projects, according to the Kyoto Protocol.
Certified Emission Reduction (CERs) is specified as a unit of Greenhouse Gas reductions that was initiated and created under the provisions of Article 12 of the Kyoto Protocol, which is the Clean Development Mechanism (CDM). Article 12 states that Certified Emission Reductions must be "certified by operational entities to be designated by the Conference of the Parties (COP) serving as the Meeting of the Parties (MOP)”.
Pricing of Certified Emission Reduction (CERs) is a significant aspect for the success of Clean Development Mechanism (CDM). Certified Emission Reduction prices are determined by evaluating the diverse risk factors involved in a project and existing market forces by both the buyer and sellers. Any Certified Emission Reduction seller who is willing and has financial capacity to take on project risk will be benefited if Certified Emission Reduction prices are higher on the other hand a Certified Emission Reduction buyer who is willing to invest in any risky project will be benefited by lower prices of Certified Emission Reduction.
There are several factors that affect the prices of Certified Emission Reduction. Some of the major factors can be summarized as:
- Prices of Certified Emission Reduction depend on EUA market price, the flexibility of EUA market price is well reflected in the prices of Certified Emission Reduction.
- Credit availability also influences the prices of Certified Emission Reduction. The distinctive long-term nature of the CER contract needs both the seller and buyer to reveal their credit details.
- Terms and conditions of the sale of Certified Emission Reduction also determine its price.
- Various types of risk like sovereign risk, quality risk, delivery risk and registration risk are also responsible for determination of prices of Certified Emission Reduction.
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