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Trading Carbon : December - January 2011
The Western Climate Initiative (WCI) announced on November 10 it has set up an administrator for its future carbon market, its latest step toward implementing the regional trading scheme that will start in 2013. WCI Inc will provide administrative and technical support to California and the four Canadian provinces that will participate in or observe the economy-wide emissions trading scheme, whose members have agreed to cut greenhouse gases 15 percent below 2005 levels by 2020. Currently California, British Columbia and Quebec have confirmed they will participate in the trading scheme when it is launched in 2013. Ontario is also expected to be a pioneer member of the scheme when it launches, after the ruling Liberal party won a crucial provincial election in October (see pages 31--33). WCI Inc will develop a system to track both allowances and offsets; will administer allowance auctions; and will conduct market monitoring of auctions and the trade of carbon instr uments. The organisation's initial board of directors will include officials from Quebec, British Columbia, and California. Its str ucture and mandate will be similar to that of RGGI Inc, the administrator of the northeast US' Regional Greenhouse Gas Initiative. "By forming WCI Inc, the participating jurisdictions are furthering their commitment to linking their respective greenhouse gas emissions trading programs," WCI said in a statement. Commodity trader Noble Group is looking for a new chief executive after a write-down of its UN offset portfolio helped to plunge the company into its first quarterly loss for over a decade. Noble, one of the world's biggest commodities traders, saw its chief executive Ricardo Leiman quit on November 10, after the company said it made a loss of $17 million in the third quarter. This reversed a $157 million profit in the same period in 2010. The company incurred losses on its portfolio of UN-backed carbon credits and cotton trading book. Noble hunts for new CEO after huge carbon credit loss 10 NEWS Dec 2011/Jan 2012 www.pointcarbon.com "The recent dramatic decline in the price of short-dated CERs (Certified Emissions Reductions) -- a maturity that we cannot hedge against -- has meant that further write downs are being made," Noble's chairman Richard Elman said in a statement. The firm did not specify how much it had lost on its CER portfolio, but an analyst note from Bank of America Merrill Lynch on the same date estimated the loss to be in the realm of $80 million--$100 million. "Insufficient liquidity for hedging led Noble to incur significant unrealised mark-to-market losses," said the report, authored by Jeffrey Ng, an analyst based in Bank of America Merrill Lynch's Singapore office. Shares in Singapore-listed Noble Group ended at SG$1.18 (US$0.92) on November 12, down 25 percent for the week. Noble had to revalue its credits in the face of plummeting CER prices, which averaged ¤9 ($12) a tonne of carbon dioxide during the third quarter, down 20 percent from the start of 2011. Prices have since fallen further, with the front-year ICE ECX contract trading at an all time low of ¤6.35/t on November 3 before climbing back to around ¤6.85 by midday on November 11. Fears about oversupply in the EU Emissions Trading Scheme, increased credit issuances by the UN and uncertainty about how offsets can be used after 2012, have caused CERs to become the world's worst-performing commodity, so far, this year. Noble is a listed participant in 80 CDM projects, including those using biomass, hydro and wind power, energy efficiency, methane capture and schemes that destroy the industrial gas HFC 23. WCI creates body to oversee carbon market REUTERS/MARK BLINCH