I have solved the issue:

Metacity had compositing-manager set to true (I don't know why as I
don't remember having enabled it, but I am not sure). This was
conflicting with compiz.

Setting it to false (gconf-editor) re-enabled compiz and desktop-
effects.

** Changed in: compiz (Ubuntu)
       Status: New => Fix Released

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Compiz stops working in Hardy after disableing/enableing desktop effects
https://bugs.launchpad.net/bugs/252937
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