LONDON Carbon offset aggregator Camco International CAMIN.L is looking for other ways to make money due to poor market conditions stemming from uncertainties surrounding a new global climate pact, its CEO said on Tuesday.
Jeff Kenna expects a basic framework agreement to be reached at United Nations climate talks in Copenhagen in December, but said the exact details will not follow for at least another year, meaning more uncertainty for firms operating under the Kyoto Protocol, which expires in 2012.
"To hedge against this uncertainty, we're building up a third wing of our business," said Kenna.
UK-based Camco is eyeing investment in clean energy projects to complement its existing business, which includes selling carbon offsets and advisory services.
Kenna said Camco helps project developers raise capital with a view to earning profit from the project's electricity and waste gas sales, as well as through selling offsets.
"Putting money into projects needs a lot of capital, which we don't have, so we work with the project developers to source that capital," Kenna said.
"Particularly in the U.S. there is a lot of activity but also a lot of a project developers who are under-capitalized." Under Kyoto's Clean Development Mechanism (CDM) firms like Camco can invest in 'green' projects like wind farms in emerging countries, and in return receive offsets, called Certified Emissions Reductions (CERs), that can be sold for profit.
The absence of a global pact following Kyoto means a hazy investment horizon for the CDM after 2012.
"We're reaching a plateau in our project portfolios and we can't really increase them," Kenna said. "If something positive came out of Copenhagen we'd be more confident and look at investing in projects that have a life beyond 2012."
If a new global framework is agreed the European Union said it will raise its emissions target to 30 percent below 1990 levels by 2020, up from 20 percent, meaning more demand for CERs.
Furthermore, a proposed U.S. climate bill currently incubating in the Senate could see some 2 billion tonnes of carbon emission cuts coming from offsets, half of which could be sourced internationally.
Kenna hopes the bill will pass next year, meaning the United States could become the world's largest carbon market by 2013.
To position itself Camco has set up an office in Denver, Colorado, and has hired a U.S. staff of 14 people.
Kenna also said Camco would look to make smaller acquisitions once the market started to recover but said it would not acquire rival EcoSecurities ECO.L, which is currently in takeover talks.
"There will be consolidation in the sector and we want to remain one of the principal businesses in the sector, keeping our brand," Kenna added.
Camco posted a maiden profit for 2008, earning 2.2 million euros ($3.2 million) after losing 12.2 million euros in 2007.
Although Camco said in August it had made a "solid" start to 2009, Kenna said it had not yet sold any CERs forward this year.
"CERs would have to be a bit higher than they are now. Below 15 euros a tonne means we are losing value for shareholders."
Benchmark CERs were trading at 13.63 euros a tonne on Tuesday afternoon, while Camco's share price was at 29 pence.
(For summit blog: blogs.reuters.com/summits/)
(Additional reporting by Nina Chestney; Editing by Greg Mahlich)