Carbon Trading Grows Amid Uncertainty

British carbon emissions exchange operator Climate Exchange – which owns and operates emissions trading marketplaces in the US, Europe and Asia -  swung to a first-half profit as trading volumes almost doubled, but said it expected growth rates to moderate in the second half.

Victoria Bryan and Michael Szabo for Reuters World Environment News (17 September 2009):

LONDON – British carbon emissions exchange operator Climate Exchange swung to a first-half profit as trading volumes almost doubled, but said it expected growth rates to moderate in the second half.

“Whilst we are delighted with the growth achieved in the first half of 2009, political and regulatory uncertainty may moderate our rates of growth during the second half of the financial year and we have observed lower volumes in August,” the company said in a statement on Wednesday.

The firm posted a pretax profit of 1.5 million pounds ($2.5 million), compared with a loss of 0.3 million in the first half of 2008.

AIM-listed Climate Exchange owns and operates emissions trading marketplaces in the U.S., Europe and Asia, including the European Climate Exchange (ECX).

Group trading volumes in the first half increased 96 percent year on year, while the ECX traded 2.685 billion contracts, nearly equaling the amount traded for 2008 as a whole.

But ECX volumes have nearly halved to 283.4 million tonnes traded in August from its record volume of 539 million in March.

Fox Pitt Kelton estimates full-year group pre-tax profits at 6.5 million pounds including share-based payments, CEO Neil Eckert told Reuters.

Andrew Shepherd-Barron of KBC Peel Hunt reiterated his sell rating and 812 pence price target, saying the shares already account for rapid volume growth in Europe and the U.S.

At 1102 GMT (7:02 a.m. EDT), Climate Exchange shares were up 17.0 pence or 1.97 percent at 880 pence on Wednesday.

Prices for voluntary carbon credits trading on Climate Exchange’s Chicago Climate Exchange (CCX) have plummeted as a result of regulatory uncertainty, more supply and less demand due to the economic slowdown, Eckert said.

CCX trades credits in the voluntary, un-regulated market where companies can offset their greenhouse gas emissions.

CCX credit prices have tumbled from a high of over $7 in May 2008 to $0.25 on Tuesday, and volumes have fallen by 44 percent in the first half of 2009.

“The voluntary market is just a stepping stone on the way toward a mandatory market, so we expect the business to transform from CCX to our Chicago Climate Futures Exchange,” Eckert said.

CCFE volumes have more than tripled and Eckert said the exchange now has a 99 percent market share of futures trading in the U.S. Regional Greenhouse Gas Initiative (RGGI), a mandatory scheme for polluters in 10 eastern U.S. states.

A new climate bill which would see the inception of a mandatory, national emissions market is currently incubating in the U.S. Senate while the United Nations is meeting in Copenhagen in December to negotiate a new global climate pact to replace the Kyoto Protocol, which expires in 2012.

Source: www.planetark.org