-----

Resources



Market News

 August 16, 2006
Global Climate Exchange confirms launch date

 London, UK - The United Nations Climate Change Secretariat says it will launch its global climate exchange on time in April 2007, following the award of a key software contract.

Some traders and investors in the world's burgeoning global carbon market had expected the award announcement months earlier and the delay had aroused fears of a late start to full trading.

The contract went to Trasys SA, an IT company based in Belgium. The company has subcontracted the European company LogicaCMG to maintain the software system's day-to-day operation.

The International Transaction Log (ITL) will allow developing nations to sell pollution reduction in units - called carbon credits - to rich countries.

Buyer nations can then count these credits towards their greenhouse gas emissions targets under the Kyoto Protocol from 2008-12. This emerging global carbon market is seen as one of the most cost-effective ways to combat climate change.

Many carbon trading contracts under the Kyoto pact are set for 2007 delivery. "We've staked our reputation on doing this (by April, 2007) and we stand by that," said Richard Kinley, officer in charge of the UN secretariat.

The ITL will also be a pre-requisite for carbon trading in the second phase of the European Union's carbon trading scheme, also from 2008-12.

The UN will meet a November test-run date for the exchange, said UN climate change spokesman John Hay. The software contractor will both develop the exchange software and provide ongoing support when the trading scheme is up and running.

The EU carbon market involves the emissions of energy-intensive companies which have to buy pollution-permitting carbon credits if they exceed EU-imposed emissions limits. They can buy these credits - called Certified Emission Reductions CERs)- either on the EU market or through the UN exchange for delivery now or in future years.

"People are contracting now to buy CERs but no-one is able to guarantee delivery on a specific date," said James Emanuel, Vice President of Environmental Markets at brokers CO2e/Cantor Fitzgerald. "Secondary market CER trading will take off when the ITL is operational."

Carbon market soars

The global carbon market saw record high volumes traded in the first half of 2006 according to Point Carbon, the Oslo-based carbon analyst. Most of the transactions take place between private entities in the European Union Emissions Trading System, but country-to-country trade will increase with the introduction of the ITL.

Kyoto's flexible mechanisms also saw considerable growth in volumes and values this year compared to 2005. In total, carbon credits from Clean Development Mechanism (CDM) and Joint Implementation (JI) projects equivalent to 226Mt of carbon dioxide emissions, worth Cdn. $2,826 million were traded during the first half of 2006.

Point Carbon's figures show that other markets are also heating up. The Chicago Climate Exchange and the New South Wales emissions trading scheme in Australia both show four times higher volumes and values than in 2005.

Taking all these markets and the EU scheme together, Point Carbon's global carbon market forecast for 2006 as a whole is for a total volume of 1,382Mt traded, worth almost Cdn. $31.4 billion, considerably more than the 800Mt, or $13.44 billion, traded last year.

In total, the equivalent of 684 million tonnes (Mt) of carbon dioxide was transacted globally during the first six months of this year, more than five times the volume traded during the same period last year, and 85% of the total volume traded in 2005 as a whole.

Worth an estimated $17 billion, the financial value of carbon trading in the first half of 2006 exceeded the entire value traded in 2005.