You wouldn’t know it from the glacial pace of carbon trading in the U.S., but for some investors carbon is a hot topic. While the Senate and House struggle over passing climate change mitigating legislation that would support carbon trading, the financial industry, ever on the alert for a profitable opportunity, continues to position itself to take advantage of this long-sought future event.
Thomson Reuters, for one, is not waiting for credible action in U.S. climate change policy to step up its commitment to serving the coming carbon trading revolution. Thomson, the information and media company with operations in over 100 countries, closed a deal Wednesday to acquire Point Carbon, the Oslo, Norway-based provider of deep market fundamentals and analysis on the carbon, power and gas markets.
Towards the end of the hectic deal-closing day, Stefan Reichenbach, the global head of commodities and energy carbon strategy at Thomson Reuters took the time to speak with me from London about his plans for Point Carbon and its place within the Thomson Reuters firmament.
With some understatement - considering the current oil spill disaster in the Gulf - he observed, “The climate change problem isn’t expected to go away in the next few years.” Reichenbach predicts that other countries besides those in the European Union will develop carbon-trading schemes in the near term, and is very bullish on the growth of these markets. While acknowledging that public opinion currently favors advancing carbon trading, Reichenbach notes, “It can change very rapidly like we’ve seen with offshore drilling if you have cataclysmic events associated with it.”
Point Carbon has over ten years’ experience providing traders with market intelligence, says the firm’s CEO and co-founder Per-Otto Wold, who joined our conversation from his base in Oslo. Wold would not disclose the terms of the deal but is clearly thrilled about his firm’s entrée onto a U.S. distribution platform. “Carbon has been one of the major price drivers for power across Europe,” explains Wold, while acknowledging the small carbon trading venues currently online in the U.S. (FYI, these include the Chicago Climate Exchange (CCX); the Regional Greenhouse Gas Initiative (RGGI) – a consortium of nine Northeast states launched in January 2009, and the Regional Clear Air Incentives Market (RECLAIM), an emissions trading program in California trading NOx (nitrogen oxides) and SOx (sulfur oxides).
It has been a difficult time for carbon trading, demonstrated by the € 5 billion tax fraud discovered at the end of last year on the EU ETS (European Union Emission Trading System), according to a report by Europol, the European Law Enforcement Agency. At the carbon trading conference in New York last March, Kjell Kristiansen, director of advisory services for Point Carbon, called the trading losses “teething problems.” This is a nascent industry and there are growing pains to be sure.
For the moment, Point Carbon’s Wold is forecasting only a ten percent chance of a carbon trading system passing both houses of Congress this session. For the longer term, he is certain it will. “The obvious question,” says Wold, “is when will there be a scheme and what will it look like.”
In her Pursuing Green blog, Frances Denmark, a financial journalist for 15 years, takes an in depth look at green investing. She provides additional coverage in her favorite subjects, including pensions, foundation and endowment investing, and women in alternative investments.
