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Carbon Prices Rebound & Diverge From Continuing Fall In Oil

September 28, 2008 – Comments (0) | RELATED TICKERS: GRN , USO

Carbon Prices Rebound & Diverge From Continuing Fall In Oil
Carbon prices are rebounding and diverging from an overall decline in commodities and oil on Tuesday as UK-based Camco International (London: CAO) recorded a $2.6 million (US Dollar) profit on the sale of 151,288 tons of carbon credits on the spot market. The CERs were sold to an undisclosed buyer outside of the European Union for an average price of just over 19 euros per ton versus an average acquisition price of just 7.5 euros per ton. With Certified Emissions Reductions (CERs) currently trading around 19.75 euros per ton on Tuesday, Camco's portfolio of carbon credits is worth over $1.2 billion (USD) at current market prices -- including over 150 projects which are expected to generate 151 million CERs by 2012 (of which 41.8 million will go directly to Camco). The head of environmental markets at Barclays Capital has predicted that carbon credits could become not just the world’s biggest commodity market; but the biggest market overall, with market experts predicting a staggering total of $1 trillion possible within a decade. The European Union Emission Trading Scheme (EU ETS) is the largest market for the trading of emission allowances, spanning 28 countries throughout Europe; and other developed countries such as the US, Japan, and Australia are developing similar ETS markets. Carbon commodity trading is dominated by EU Allowances (EUAs) with a 78% share, followed by CERs which are created through CDM projects such as those described earlier.

As part of this bullish view on the future of carbon credit trading as a new commodity class, Barclays has recently launched an exchange-traded note (ETN) to track the global price of carbon. The iPath Global Carbon ETN (NYSE: GRN) trades throughout the day just like stock and is structured to track Barclay’s Global Carbon Index Total Return, with several similar products in registration for potential market launches to provide investors with simple, low-cost access to the market for carbon credits. These carbon credits are traded by companies who get tax breaks and other incentives for lowering pollutants into the air, as well as investors and speculators who want to participate in the global reduction of greenhouse gases.