updated...fixed... Such instruments were discussed in carbon markets as early
as April 2007 and doesn't seem to have traded, said Lance
Coogan, chief executive officer of Gemini Structured Carbon Ltd.
in London. Coogan wrote research articles on the products
starting that year, he said today by phone and e-mail. "The market is starting to exhibit signs that more
sophisticated tools are necessary to mitigate potential losses
and increase transaction efficiency," said Brett Genus, a
broker at Evolution Markets Inc. in London. "The time may,
indeed, be right for broader adoption of these products," he
said today by e-mail.
+------------------------------------------------------------------------------+
CarbonDesk Targets Carbon Spread Concern With Option (Update1)
2010-08-23 17:38:10.917 GMT
(Updates with Gemini comment in eighth paragraph.)
By Mathew Carr
Aug. 23 (Bloomberg) -- CarbonDesk Group Plc is offering a
financial instrument for polluters concerned about regulatory
risks in the carbon market after a clampdown on offsets from
some emissions-reduction projects, the London broker said.
A call option on the spread between United Nations and
European Union carbon futures may help protect the profit
emitters can make by selling EU allowances granted for free and
swapping some for cheaper UN credits, Brett Stacey, CarbonDesk's
chief executive officer, said by phone and e-mail Aug. 20.
Regulatory reviews by the Clean Development Mechanism
executive board may crimp supply of offset credits, narrowing
the gap with more-expensive European Union allowances, according
to analysts at Orbeo, the Paris-based carbon venture of Societe
Generale SA and Rhodia SA. The CDM last week halted issuance to
five projects that stem hydrofluorocarbon-23 gases.
The spread between EU allowances and credits for December
shrank 21 percent last week. It narrowed another 5 cents today
to 1.65 euros ($2.09) a metric ton at 5:28 p.m. on ICE Futures'
European Climate Exchange in London.
CarbonDesk would broker a call option at a 1 euro strike
for a premium of about 25 euro cents a ton, Stacey said. A call
option gives the buyer the right to purchase at a certain level.
Should the spread narrow to zero, the buyer of the option
could exercise the option and still make a 75 cent profit on the
swap, the 1 euro price minus the premium, he said. Should the
spread return to the May 26 price of 2.87 euros a ton, the
emitter will lose a maximum 25 cents a ton of that extra profit,
CarbonDesk said.
'New Instrument'
"This option might become a new instrument that ICE will
consider listing," Stacey said.
Such instruments were discussed in carbon markets as early
as April 2007 and doesn't seem to have traded, said Lance
Coogan, chief executive officer of Gemini Structured Carbon Ltd.
in London. Coogan wrote research articles on the products
starting that year, he said today by phone and e-mail.
Regulators of the UN-overseen CDM, the second-biggest
emissions market, said Aug. 20 they won't immediately issue
tradable emissions credits to the developer of a fifth HFC-23
project as they seek more information. UN regulators are ramping
up scrutiny after allegations that some developers are seeking
excessive credits related to HFC-23, an industrial gas whose
warming potential is 11,700 times greater than carbon dioxide.
"The market is starting to exhibit signs that more
sophisticated tools are necessary to mitigate potential losses
and increase transaction efficiency," said Brett Genus, a
broker at Evolution Markets Inc. in London. "The time may,
indeed, be right for broader adoption of these products," he
said today by e-mail.
For Related News and Information:
Emission market news NI ENVMARKET <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>
--With assistance from Catherine Airlie in London. Editors: Rob
Verdonck, John Buckley.
To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or
m.carr@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
