Exchange and trader seek gains on carbon volatility

By Fiona Harvey, Environment Correspondent
Published: March 12 2009 23:36

Turmoil in the carbon markets threw up two contrasting sets of company results on Thursday, one from trading exchange business Climate Exchange, the other from EcoSecurities, a carbon trader.
Turnover at EcoSecurities, which invests in projects that generate carbon credits under the Kyoto protocol, rose almost tenfold from €7.2m to €69.5m (£64.4m) in the year to December 31. This helped narrow the pre-tax loss from €43.3m to €31.2m.

Prices for carbon credits have dropped sharply in recent months, from a high of nearly €20 last year to about €7-€8 at present.
The credits, awarded to carbon-cutting projects in developing countries, trade at a discount to carbon permits under the European Union’s emissions trading scheme, which have plunged from a peak of about €30 last summer to about €12. The falls are a result of the global slowdown, which has reduced greenhouse gas output and thus the need for companies to buy permits.
The falls devalue the amount EcoSecurities can expect to be paid for some of its portfolio of credits, but it has reduced the risk by contracting forward sales of about 34m of its credits, out of a portfolio of 140m.
Bruce Usher, who is due to step down as chief executive, said EcoSecurities’s pipeline of credit-generating projects was slowed by the uncertainty over the future of the Kyoto protocol, whose current provisions expire in 2012. A new chief executive has not yet been appointed.
Climate Exchange, by contrast, is buoyed by volatility in the market, as it operates an exchange where the permits are traded.
“When prices go up or down we get big volumes,” said Neil Eckert, chief executive. However, he did not “expect to see an end to price volatility, or stabilisation or stagnation of the carbon price”.
Turnover at Climate Exchange rose 65 per cent from £13.8m to £22.8m in the year to December 31, as volumes more than doubled. The pre-tax loss narrowed from £8.3m to £2.5m.
Mr Eckert said the outlook was brightened by the announcement by President Obama that he would seek to implement a cap-and-trade system for greenhouse gases, similar to that of the EU, before 2012. Mr Eckert said this would treble the carbon market in size. Climate Exchange operates two US subsidiaries.
Shares in EcoSecurities rose 1½p to 19p. Climate Exchange added 5½p to 815p.
Copyright The Financial Times Limited 2009