Carbon exchanges cashing in amid EU slowdown

LONDON, Feb 17 (Reuters) - Carbon emissions exchanges are thriving, making as much as 2 million euros ($2.55 million) a week in revenues, Reuters data shows, just as European industry struggles to survive in the wake of the economic downturn.

Under the European Union’s Emissions Trading Scheme, heavy industry is allotted an annual quota of emissions permits called EU Allowances (EUAs), and are forced to buy more, often over carbon exchanges, if they emit more carbon dioxide than allowed.

But cash-strapped firms seeking to raise funds in the short-term have been dumping 2008 EUAs on the spot market with a view to borrowing from their 2009 quota in April when last year’s permits are due to be handed in.

Spot prices for EUAs trading on Paris-based BlueNext BNXCO2-2, Europe's main spot EUA exchange, have fallen by almost 50 percent so far this year to around 8.30 euros a tonne.

Daily spot volumes, on the other hand, have more than doubled since last November, meaning more revenues for the exchanges that trade them. “With people wanting to hold more liquid positions, the spot market is a natural home,” BlueNext’s Marketing and Communications Director Keiron Allen said in an interview, adding BlueNext holds a 98 percent share of EUA spot trading.

The recent surge in selling has seen BlueNext’s volumes average 7.3 million tonnes so far in 2009, and top 10 million tonnes in each of the past five trading days.

BlueNext, a joint venture between NYSE Euronext NYX.PA and France's Caisse des Depots, charges 0.017 euros per transaction.

Two sides to every trade means revenues of 0.034 euros per tonne of CO2 traded, or a daily average of around 250,000 euros.

The Paris-based exchange’s fortunes have dramatically improved since last October, when the spot EUA market was effectively shut down for two weeks while a trading link between the EU and U.N. was tested.

Last week, BlueNext traded over 60 million tonnes of CO2, generating revenues of more than 2 million euros.


Four European exchanges currently offer spot EUA trading, with the European Climate Exchange (ECX) CLIE.L, the world's largest emissions exchange, entering the fray with its own spot-style daily futures contracts on March 13.

Although BlueNext recently cut transaction fees and extended trading hours to prepare for the looming showdown, it may not be enough to keep customers from moving to the ECX, which is open longer and expected to charge less per trade.

But ECX may be joining the party too late, as the bulk of 2009 EUA selling may be done by mid-March and volumes tail-off from current levels.

Barclays Capital’s Trevor Sikorski said on Monday that spot EUA selling is expected to accelerate this week as Germany, Europe’s most polluting country, issues 2009 EUAs to industry.

The EU’s deadline for issuing 2009 EUAs is February 28.

For an interactive chart looking at the trading volumes of Europe's emissions exchanges, go to here (Editing by Keiron Henderson)