JERUSALEM (Reuters) - Citibank has started to trade Kyoto-backed carbon offsets in Israel from green projects, it said on Tuesday.
Offset trading will be done from the bank’s existing trading desk in Tel Aviv which mostly deals with foreign exchange and government bonds.
“This is part of our strategy to introduce innovative products to the Israeli capital market,” Ralph Shaaya, head of Citi’s Israel operations, said in a statement.
Citibank will trade offsets called certified emissions reductions (CERs) issued under the Kyoto Protocol’s Clean Development Mechanism (CDM).
The Kyoto Protocol is the United Nation’s main weapon to fight climate change. Under it, developed nations whose greenhouse gas emissions rise above target levels can buy CERs from clean energy projects in developing countries like China.
As a developing country, Israel is not obliged to implement the protocol and therefore has no emissions reduction target. But it has ratified the pact and can engage in the CDM market.
Citibank said this made Israel an excellent target for clean energy projects in the CDM market and CER trading.
“Israeli companies are extremely innovative,” Neil Corney, a Citi managing director who will head the new activity, told Reuters. “There is potential to monetize these activities.”
Corney said it was hard to quantify the Israeli market due to volatile CER prices over the past 6 months and talks of shifting to a sectoral carbon market crediting mechanism after 2013.
“But anytime a major power plant will be developed there is an opportunity,” he said. “We are an active market maker in this field and can give the best price and best opportunity to monetize these transactions.”
Citibank said it will buy CERs from Israeli companies and then sell to other countries and companies who need them. Corney said the bank has been in contact with local firms and transactions have already begun.
Citibank has been active in this market in other countries for several years and sees scope for $70 billion in transactions.
The global market for trading carbon futures was valued at around $120 billion last year and still has room to grow.
Reporting by Steven Scheer; editing by Nina Chestney