Climate bill delay stymies voluntary CO2 market

LONDON Wed Apr 28, 2010 10:05am EDT

U.S. Sen. John Kerry reads a statement after a meeting Syria's President Bashar al-Assad in Damascus April 1, 2010. REUTERS/ Stringer

U.S. Sen. John Kerry reads a statement after a meeting Syria's President Bashar al-Assad in Damascus April 1, 2010.

Credit: Reuters/ Stringer

LONDON (Reuters) - Delay to a draft of a U.S. climate change bill this week has frustrated some investors in the voluntary carbon market, who were tipping it to become the template of a federal climate change bill.

Many investors are looking for any positive steps toward a U.S. climate bill before committing themselves to the voluntary market.

The so-called Kerry, Graham and Lieberman (KGL) draft was scheduled to be unveiled on Monday but a breakdown in bipartisan talks delayed it.

The bill was expected to indicate how many offsets could be imported under a U.S. emissions trading scheme.

"Factors such as sector, size, start date, auctioning limits and fungible credits were expected by many to be revealed with explicit information possibly jump-starting the moribund U.S. carbon market," said Grattan MacGiffin, head of voluntary carbon markets at brokers MF Global.

The KGL bill could be unveiled at a later date if Senator Graham rejoins talks or Kerry gets more support from climate moderates, but time is short to pass it before November elections.

Prices in the U.S. regional cap-and-trade market RGGI seemed to rise on the prospect of the draft launch but could fall on an extended delay as many participants believe they have a good chance of eligibility in a U.S. federal scheme, MacGiffin said.

"If the draft goes through we will see some speculative trading, particularly of CRTs (Climate Reserve Tonnes). Everyone is waiting for direction before they get into the market."

Voluntary carbon offsets allow individuals and companies to compensate for their own greenhouse gas emissions by funding projects that reduce emissions, often in developing countries.

GREEN EXCHANGE

Green Exchange LLC has filed for status as an independent exchange, the company said this week.

If approved by the U.S. Commodity Futures Trading Commission (CFTC), the exchange could operate as an independent entity and list futures and options traded in the EU's Emissions Trading Scheme as well as those traded in North American markets.

"Once Green Exchange is granted designation by the CFTC, our customers can be confident that their transactions on the exchange will be subject to a very high level of oversight," said Nancy King, chairwoman of Green Exchange's board.

On Tuesday, the U.S. futures regulator ruled against more oversight for the carbon market in a crack-down on speculative trades in energy and metals.

(Editing by Sue Thomas)

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