UN, Greenpeace approve of carbon trading

Heres a good article that should be read.   Emissions trading is seen by many as the glue that will hold the system together by reducing greenhouse gas production while generating funds to develop clean technology and help poor countries adapt to environmental changes such as rising sea-levels.

“A functioning carbon market will be critical to a successful agreement,” U.N. climate chief Yvo de Boer told The Associated Press ahead of the Bangkok meeting.”The point of the market is to find the most efficient way to reduce emissions,” said Greenpeace’s Bill Hare, who supports the market but admits he has concerns about the lack of regulations.

“The tighter the cap, the higher you will see carbon prices and the more incentive to switch to investments to lower emitting technology and practices,” he said.

Carbon Investments

I am posting a whole article from IBD because there are just too many good things in it.  Green investing is nothing new, but it is certainly picking up steam and attracting more attention.  Carbon investments and/or carbon futures will be the next big thing in my opinion.  The day you see it on the front page of Barron’s or Businessweek is the day carbon investing has arrived.

Merrill Lynch has rolled out a set of indexes anticipating the growth of carbon emissions markets.

Francisco Blanch, Merrill’s head of global commodities research, says the indexes track the value of carbon emissions credits.

They are designed as investment vehicles, and the firm hopes to see them used in an ETF or exchange traded note.

In the European Union, companies are given carbon credits that can be traded in a way similar to futures and options. Buying more allows for more carbon emissions, while selling off credits means a company must emit less.

Other countries have also considered cap-and-trade markets.

The base index is the MLCX Global CO2 Emissions Index. It tracks emissions under the European Union’s emissions trading scheme and the Kyoto protocol.

The MLCX Global CO2 index weights both schemes by their relevance in the global emissions markets.

Two more indexes track the European Union Allowance and Certified Emissions Reduction markets.

No Central Exchange

No central exchange exists, so the MLCX Global CO2 Emissions Index tracks only two sets of contracts.

Blanch notes that as countries outside Europe adopt carbon emissions trading, the number of contracts will go up.

Merrill isn’t the first to take a stab at trading on carbon credits.

XShares Advisors registered for an ETF called AirShares that also tracks carbon credits traded in Europe.

That ETF hasn’t come to market yet, and a spokesman for XShares wasn’t able to say when it would.

It’s another step in the appearance of green indexes and ETFs.

Several already track alternative energy as well as environment-related stocks.

Green ETFs

PowerShares has one of the larger ETFs of this kind: the $1.4 billion PowerShares WilderHill Clean Energy (NASDAQ:CLNE) PBW.

Most such ETFs performed strongly until the end of last year, then fell with the rest of the market.

Powershares WilderHill Clean Energy’s price rose 60% during 2007 before falling back by 28% since New Year’s.

Claymore and Van Eck have also launched environment-oriented ETFs.

Claymore S&P Global Water Index ETF CGW has grown to $340 million in assets since its launch in May.

Claymore’s offering tracks companies that make water treatment chemicals, pumps, motors, plumbing equipment and meters.

Van Eck’s entries in the field include Market Vectors Global Alternative Energy ETF GEX and Market Vectors Environmental Services EVX.

Carbon futures could be biggest derivates market in world

This would be amazing:

Bart Chilton, a commissioner at the US Commodity Futures Trading Commission, said: “I can certainly see carbon becoming the biggest of any derivatives product in the next four to five years. And that would of course mean overtaking T-bills [Treasury] and any contract that is out there right now.”

Mr Chilton’s forecast is the most optimistic assessment to date by a US regulator of the market potential for carbon emissions trading. Although emissions trading in both the US and Asia remains relatively limited, he said both markets could take off “very rapidly”.

Think about it.  A market of only about $60 billion overtaking treasuries in only five years sounds almost ridiculous.  But there definately is huge upside in carbon derivatives trading if the US and Asia get on board

Green Exchange first week volume

The following is the carbon emissions trading volume of NYMEX’s Green Exchange’ first week:

Trade volume in The Green Exchange’s carbon contracts alone totaled 1.59 million tonnes, making it the most successful launch of exchange-traded carbon contracts.

At the close of the holiday-shortened week of trading (Monday, March 17 to Thursday, March 20) The Green Exchange reports the following volume:

–  European Union carbon allowances futures (EUAs) (all delivery
dates): 280 contracts
–  EUA options (all delivery dates): 1,000 contracts
–  Certified Emissions Reductions (CERs) (all delivery dates): 310
contracts
–  SO2 allowances (all delivery dates): 236 contracts
–  NOx allowances (all delivery dates; annual and season contracts):
10 contracts

Full press release at Carbon Traders Daily

NYMEX Begins Carbon Emissions Trading Exchange

The first serious challenge to London’s pre-eminence in the carbon markets will be mounted today when the New York Mercantile Exchange begins trading carbon dioxide and other greenhouse gases.

Nymex said its Green Exchange would trade in a variety of “carbon financial instruments,” including futures on United Nations-issued carbon credits and European Union-issued emissions allowances.

Randy Warsager, vice-president for institutional market at Nymex, said: “We think this market is growing well and naturally we would like to participate in that growth. We think there is plenty of room for competition.”

London has been the centre of carbon trading since the market took off when the EU’s emissions trading scheme was introduced on January 1 2005.

FULL ARTICLE

Australia Carbon Trading Scheme by 2010

Australia will have a carbon emissions trading scheme in place by 2010, under a plan released Monday by the minister for climate change, Penny Wong.

Senator Wong said the national scheme would “constitute the most significant economic and structural reform undertaken in Australia since the trade liberalisation of the 1980s.”

Emissions trading schemes place a limit on the amount of greenhouse gas pollution which companies can produce, forcing heavy polluters to buy credits from companies that pollute less — thereby creating financial incentives to fight global warming.

Wong said consultations with industry and non-government groups had already started and she hoped to have a draft proposal on the mechanics of the scheme available for public comment by July.

She told the Australian Broadcasting Corporation the draft would address: “How we are going to set the targets, what sort of issues we are going to address, how we will address the impacts on various aspects of the economy and how the scheme will work.”

She said the scheme would see a price placed on greenhouse gas emissions, such as those from the burning of fossil fuels such as coal and gas.

“We will set a level of emissions, we will have permits up to that level, and the market will trade and the market will set the price,” she said.

Wong said she wanted to have the bill before parliament by early 2009 and the new laws into force and a regulator established by later that year.

FULL ARTICLE

Australia ~ Carbon Trading Could Reap Billions

Cutting greenhouse-gas emissions is set to reap a bonanza of up to $20billion for Commonwealth coffers.

In a policy brief out today, the Climate Institute says that, based on economic modelling, an emissions-trading system could yield a dividend of between $7 billion and $20 billion for the nation’s revenue in as few as 12 years.

It comes on the same day as the lead government adviser on climate change, Professor Ross Garnaut, brings out his second discussion paper and as the Australian Industry Group’s budget submission calls for a $3 billion tax break for business to deal with the Government’s climate-change policies.

The Climate Institute said that the lower end of expectations on the emissions-trading dividend, $7billion, was more than what was allocated in last year’s budget for community services and the higher end, $20 billion, was more than the allocations for either defence or education. The institute modelling used the target of cutting greenhouse gases by 20 per cent from 1990 levels by 2020.

Full Article

http://canberra.yourguide.com.au/news/local/general/carbon-trading-to-reap-billions/1206885.html