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Firms bolster carbon emissions trading

Date: Thursday, November 29, 2007
Author: Shanny Basar, Financial News Online US

Barclays Capital has bought a stake in a Canadian company that reduces greenhouse gas emissions as the Chicago Climate Futures Exchange, the US environmental derivatives market, increased access to its products in anticipation of greater volumes.

Global carbon emissions trading volumes should reach €25bn ($37bn) by the end of this year, more than double the level of two years ago, according to Celent, a Boston-based research and consulting firm. Celent has predicted a surge in volumes to €40bn by 2012 if retail investors enter the market.

Barclays Capital has invested in Enhance Energy, a Calgary-based private company specializing in carbon dioxide enhanced oil recovery and sequestration, techniques which significantly reduce greenhouse gas emissions.

Joe Gold, co-head of commodities at Barclays Capital, said: “Alberta is the first province or state in North America to legislate a greenhouse gas emissions scheme that includes mandatory reductions and the creation of tradable credits. Initiatives like these may help pave the way towards a global carbon scheme."

Barclays Capital said it was the first bank to take physical delivery of European Union allowances and the first to take delivery of certified emissions reductions.

In August, the Chicago Climate Futures Exchange launched certified emission reduction futures contracts, which it said were the first Kyoto compliant emissions instrument to be used as a hedging tool on a North American exchange. The exchange is hoping certified emission reductions will become the international currency standard in the global greenhouse gas reduction markets.

The Chicago Climate Futures Exchange, a subsidiary of the Chicago Climate Exchange, has also connected to the order-entry platform developed by Trading Technologies, a derivatives software firm. Trading Technologies already connects to the European Climate Exchange, which was launched by the Chicago Climate Exchange in 2005.

Harris Brumfield, chief executive of Trading Technologies, said: “Our connection to the Chicago Climate Futures Exchange gives our customers access to one of the world’s most interesting new exchanges.”

This month, GFI Group, the US interdealer derivatives broker, launched the first electronic platform for emissions trading in the over-the counter-market as exchanges develop products which already have a strong presence in Europe and emerging countries.

In September, the Brazilian Mercantile & Futures Exchange held an auction for the sale of certified emission reductions which it said was the first to be managed and promoted by a regulated exchange.

Last month, CME Group, the US derivatives exchange, signed a letter of intent to exchange an equity stake in the Brazilian market. If it completes the acquisition it will developing a market for trading in carbon emissions.

Rival NYSE Euronext has partnered with French bank Caisse des Dépôts to launch a carbon emissions trading market next year.