It is the largest intermediary in the ETS market, and has traded 450 million tonnes of carbon credits, with a total notional value of about $7bn.
Louis Redshaw, head of environmental markets, says that the opportunities in this market are enormous. “It is the first time that boards of companies have been incentivised with cash to do good for the environment. The growth trajectory for the EU Allowance [EUA] market is straight up, partly because we are coming to the junction between phase 1 and phase 2 of the EU scheme and there are balances to settle, and partly because there are more and more speculators in the market,” he says.
“We also expect the market in Certified Emission Reduction (CER) certificates, which is pretty thin right now (the secondary market trades about 100,000 tonnes a day, versus about seven million tonnes in the EUA market), to be at least as big as the EUA market.”
BarCap continues to play a leading role in the market’s development; one example is its standardisation of the CER forward contract. “In 2006, we spotted a disparate bunch of terms and conditions in trading secondary CERs and saw it as an opportunity to develop a standardised contract,” says Mr Redshaw. “It brings certainty to the market because now everyone knows the bid and offer level and that promotes more trading. At the same time, it increases flow trades – our core business.”
