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Climate Bridge, Australia’s largest developer of emission credits under the Clean Development Mechanism, will start a trading business focused on permits from Europe and other international markets.
The Melbourne-based company is one of the first 11 to get the Australian Financial Services License that will be required starting next year to offer clients trading or advice on emission permits. Climate Bridge’s new business will help Australian customers execute spot trades as well as futures and options contracts for European Union allowances and so-called Certified Emission Reduction from the CDM system, according to Chief Executive Officer Alex Wyatt.
“From 2015, Australian companies will be able to use international carbon units to cover up to 50 percent of their emissions liability,” Wyatt said. “They need access to European markets to do this.”
Australia introduced a fixed price of A$23 ($24) a ton for greenhouse gases from about 300 of the nation’s largest emitters, and is scheduled to start a cap-and-trade program that allows imported allowances starting in 2015. Clients are already asking how to trade permits from overseas, even though full trading is three years away and despite the threat Australia’s carbon-trading legislation will be scrapped after the next national election, Wyatt said.
The focus on trading marks a transition for Climate Bridge, which expects to have almost 100 projects registered by the end of the year. While 95 percent of Climate Bridge’s work until now has involved selling those credits to European parties bound by the continent’s cap and trade system, that business is more difficult now, Wyatt said. It stopped signing up new projects in 2011 as the EU imposed restrictions on new projects from China and the prices of CERs collapsed. CERs have traded this month for less than 1 euro on the ICE Futures exchange in London.
By selling European permits to clients in Australia, Climate Bridge is effectively reversing the flow of trade as Western nations become exporters of carbon allowances, said Sarah Chapman, who will head the new trading unit.
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