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Debate continues to rage about the best ways to tackle climate change and its alleged major contributor, carbon emissions. But thus far, the only widely accepted method for capping carbon emissions is to force polluters to pay for the right to emit. But, whereas some continue to doubt the effectiveness of emissions trading in reducing emissions themselves, for Climate Exchange this matters not a jot - results issued today show that it has positioned itself as a major player in the provision of markets and instruments for greenhouse gas trading.
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In Europe, the European Climate Exchange (ECX) has forged a dominant position in the world's first established regulated carbon trading jurisdiction, and its average daily volumes traded hit 4.4m tonnes in 2007. The trend has continued upwards with ECX volume hitting a new record of almost 15m tonnes traded in one day in January and 171m tonnes traded in the month. The ECX has an 85 per cent market share of European carbon trading.
In the US, the Chicago Climate Exchange (CCX) has also recorded record day and month trading statistics since the turn of 2008, despite the US system remaining voluntary. This is likely to change, with all three major players left in the US presidential race committed to legislating some form of carbon trading system.
Climate Exchange is building new products around each of its exchanges including carbon and other greenhouse gas futures, and a recently launched catastrophe futures product aimed at the insurance industry. The longer-term goal is to have a full range of environment-related products, likely to include some water-related investment opportunities.
Geographic expansion is also key, as Climate Exchange needs to keep ahead of the game in what is already becoming a competitive market, because mainstream financial players have recognised that there is money to be made from climate change. It is launching a trading body in Canada and has plans for schemes in China and India.
Climate Exchange is well positioned to grab a significant slice of what could, in the long term, be very considerable markets. Its shares are ahead of our buy recommendation (1,121p 7 December 2007) but on long term prospects remain a buy at 1,245p.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
