Lehman Brothers shuts carbon trading desk
LONDON (Reuters) - Lehman Brothers shut down its carbon emissions trading desk after the bank filed for bankruptcy protection, a source close to the company told Reuters on Monday.
"Everything's stopped, blocked ... it's a bit anarchic," he said.
Lehman declined to comment on the matter.
The U.S. investment bank filed for Chapter 11 protection on Monday while Merrill Lynch, also plagued by toxic, mortgage-related debt, agreed to be bought by Bank of America. Merrill's carbon desk was open as usual on Monday, a source familiar with the bank said.
Lehman's membership on the IntercontinentalExchange, which includes access to the European Climate Exchange, the world's largest emissions trading exchange, was suspended, an ICE spokesman said.
This effectively disallows Lehman from closing any open positions on its trading books.
LCH.Clearnet, which handles clearing for ICE, also restricted Lehman's trading, citing the company as a "defaulter", the clearing house said in a statement.
"Lehman's were relatively small, they were late coming into the (emissions) market," one London-based broker said, adding that Lehman is thought to have been more involved in the Clean Development Mechanism (CDM) market than in day-to-day trading.
In the $13 billion CDM market, a trading scheme under the Kyoto Protocol, companies from rich nations can invest in clean energy projects in developing countries and in exchange receive offset credits, called CERs, which they can use toward emissions targets or sell for profit.
Lehman has stakes in up to 10 CDM projects, the first source said. "There are some very good projects in the pipeline," he said, adding that they would probably be sold by liquidators.
BACKFIRE
The projects, mostly in China, are expected to generate 10 million to 12 million CERs by 2012, worth up to 275 million euros ($385.4 million) at current market rates.
The source said the projects are of high quality and not involved in the destruction of hydrofluorocarbons (HFCs), a lucrative trade considered controversial by many in the emissions market.
One potential implication of Lehman's demise is the effect felt by those on the other side of these CER deals, often small companies in developing countries.
"If Lehmans have entered into direct contracts with counterparties in the developing world, chances are these contracts are probably not that complex," the broker said. Continued...
