Environmental Markets

A senior NYMEX official told reporters Wednesday that the exchange was considering getting into the business of carbon emissions trading. Given the actual, but especially the potential, size of this market, it makes sense that established bourses would take a good hard look at it. This will probably not be seen as very good news by the folks at Climate Exchange plc . Of course, until NYMEX actually unveils anything substantial, this will remain nothing but chatter.

Over the past two weeks, a couple of announcements were made that went mostly unnoticed despite their importance to the North American carbon marketplace. Firstly, on May 30, the Montreal Exchange, a derivatives exchange, announced that it was launching an emissions trading market for CO2. The Montreal Exchange is now a unit of the TSX Group (TSXPF.PK or X.TO), the firm that runs all of Canada's exchanges. The second announcement came last week, when the premiers of Quebec and Ontario, Canada's two largest provinces and the heart of its industrial base, announced that they were moving ahead...

Whether you agree it's because of human activity or not (and, for the record, I do), there's no doubt that the weather has been a little wacky over the past few years, driving a range of events that have had very real repercussions on businesses and the economy. Hurricane Katrina is one obvious example, but there have also been other, more subtle cases. Many ski resort operators in North America, for instance, were beginning to believe that winter would never arrive on the eastern side of the continent. In the west, we're now being told that cold weather...

UBS (NYSE:UBS) announced on Friday the launch of the UBS World Emissions Index (UBS-WEMI) – the world’s first index based on global carbon markets. At the moment, only the two exchanges linked to the EU Emissions Trading Scheme (ETS) , the Nordic Power Exchange (Nordpool) and the European Climate Exchange (ECX), qualify for WEMI. The index is composed of future contracts on CO2 weighted between the two trading platforms as follows: ECX, 72.11% and Nordpool, 27.89%. The weights are allocated based upon the liquidity of the underlying exchanges as well as their respective share in the European carbon market....

The term environmental markets remains foreign to most investors (and environmentalists!), even though these markets represent, in my view, a very compelling investment story. Although we've discussed trading in carbon emissions in the past, I thought I would expand a bit and talk about environmental markets in general, and about good ways to play them. What's An Environmental Market? Environmental markets exist at the confluence of two movements: (a) A growing desire on the part of national and regional governments in several countries to both limit environmentally-damaging behavior and to promote the growth of alternative...

Jim Hansen Last week, I wrote that the U.S. is on course to set a new export record of coal. A few days later the EIA made similar projections and estimate that exports will reach 125 million tons for 2012. One side effect of the success of U.S. coal exports is the degree to which may they have cancelled out the carbon emissions reduction experienced in the U.S. as shale gas displaced coal in the power generation sector. This question of displacement was addressed in a study just released by researchers at the University of...

Most Americans now agree that something needs to be done to reduce our greenhouse gas emissions. Hopefully most Americans now appreciate that this is not a small, but even more so, not a simple problem. I am a big believer that the playing field for our low carbon future should start level, and the market should be structured to allow our major power and energy companies a chance to lead the way, instead of simply dishing out punishment for our combined historical choices. Carrots and sticks work well together, but sticks alone are not going to solve our...

An interesting piece yesterday in POLITICO on how carbon prices on the Chicago Climate Exchange (CCX) have been trending up in recent months, mostly since it's become clear that all three remaining presidential hopefuls will likely regulate CO2 emissions at the federal level. In fact, as per the chart above, prices for the right to emit a metric ton of CO2 have been on a tear, recovering from a pretty significant slump in the preceding months. Last week, the World Bank Carbon Finance Unit released its annual update on the state of global carbon market (PDF...

Just a quick follow-up on my carbon trading post a few days ago. Thanks to GreenBiz.com for the heads up on the results of a survey that were released during MIT's seventh annual Carbon Sequestration Initiative Forum. The results show that climate change now tops the list of environmental concerns for Americans. I don't want to reveal too much here since this is a GreenBiz.com story, but it suffices to say that this provides yet more ammunition to the political backers of a framework to reduce greenhouses gases in America. Momentum is building and there will definitely be some...

by Debra Fiakas CFA Glyeco recycles waste glycol into reusable antifreeze, windshield wiper fluid and air conditioning coolants for the automotive and industrial markets.   The used coolant and antifreeze liquids are frequently contaminated with water, dirt, metals and oils.  The company uses a proprietary technology at the foundation of its recycling system to eliminate contaminants.  The company focuses mainly on ethylene glycol in its six processing plants. Last month chemical recycler GlyEco, Inc. (GLYE:  OTC/QB) acquired Brian’s On-Site Recycling, a provider of antifreeze and air conditioning coolant disposal services in the Tampa, Florida area.  The deal extends...

To be sure, the near-term prospects for carbon emissions trading are bleak. Continued decline in industrial production across the world's major manufacturing economies will inevitably lower carbon emissions. The clearest indicator of this, short of directly measuring emissions, is a sharp decline in the price of various fossil energy commodities (i.e. oil, natural gas and coal) on the back of falling demand. Another important factor for carbon emissions trading is that the commodity in play - the regulatory right to emit a unit of carbon dioxide equivalent (CO2e) - derives its legitimacy entirely from a regulatory scheme...

Today, while reading an article on cleantech ETFs by The Motley Fool, I found out that XShares Advisors LLC and the Chicago Climate Exchange were working on a carbon emissions-based ETF (PDF document). There is not a lot of info available on what exactly this ETF will track. We reported back in November that UBS had launched an index based on European carbon prices. As noted by Richard Kang at around the same time, this index is well-suited for something like an ETF. If any of our readers have any further insight on this, don't hesitate...

Charles Morand At $126 billion transacted in 2008, up from $11 billion in 2005, the global carbon market is the fastest growing commodities market in the world and, provided that an agreement is reached at the COP15 conference in Copenhagen and that the US adopts a cap-and-trade program, this growth could go on for several more years. Yet this is a market that remains comparatively unknown for a number of reasons, not the least of which is the fact that the rules surrounding it are very complex. Unlike other commodities, to successfully invest directly in...

Biochar is still mostly a research and cottage industry, yet it has the potential to impact returns for a broad range of investors. Tom Konrad, Ph.D., CFA Biochar, or amending soil with biomass-derived carbon, shows great potential to improve the productivity of soils, as well as to increase the utilization of fertilizers by plants, while sequestering carbon to reduce the drivers of climate change.  On August 10, I went to the 2009 North American Biochar Conference to look at the potential for investors.  Before I went, I took a look at the publicly traded companies...

Close followers of the environmental finance space have known it for a while; Climate Exchange (CXCHF.PK or CLE.L) is sitting on a potential gold mine. The market for environmental commodities, but especially carbon emissions, is slated to grow significantly over the next 5 to 7 years. It was therefore only a matter of time before competition sprung up, both from small players trying to leverage their technological platforms and from the big guys. The big guys came out swinging this week, with NYMEX announcing a partnership with JP Morgan and Morgan Stanley, among others, to set up a...

For those interested in the topic of emissions trading, a new piece was just published by the International Emissions Trading Association on the topic of 'linking' different emissions trading regimes (PDF document). Linking entails allowing emission credits from one scheme to be rendered tradable in another. For example, European credits would be valid and tradable in California, and vice-versa. Beyond allowing the carbon market to become more efficient and liquid, linking could also present a range of arbitrage opportunities. For all of you environmental markets fiends out there, I would definitely recommend this paper. It's short (13...