In this feature Tanja Havemann, director of Beyond Carbon shares why despite the credit crisis, inconclusive Copenhagen and Cancun Kyoto Protocol talks and the scandals that affected the carbon market earlier this year, she still sees investment opportunities and, why shifting toward implementing regional schemes (fragmentation in markets) as opposed to waiting for global consensus on regulation has its advantages...
Q1 - A brief overview of how carbon markets function and the status quo.
The biggest ‘carbon market’ exists within the EU - the credits that are traded are ERUs (Emission Reduction Units), EUAs (EU Allowances) and CERs (Certified Emission Reductions).
Two of these are created by 'projects' (i.e. result in offsets) - those are ERUs and CERs and EUAs are allocations.
EUAs generally trade at a premium
Q4 - Given that the current trading value of one carbon credit, the equivalent of one metric ton of CO2 emission is still considered by many market followers as not being high enough - is this a deterrent?
It does not seem to discourage polluters to reduce their emissions.
The relevance of price formation/ establishing a floor
Q5 - Although trading carbon credits- trading carbon as a commodity, has been around for some time now - how investable is it and how can investors access these markets - via trading platforms/funds/indexed products?