Carbon Overtakes Gasoil as Open Interest Surged 55% in Past Year - Bloomberg

Open interest in European Union carbon futures on the ICE Futures Europe exchange overtook those in gasoil after surging 55 percent last year, making emissions the second biggest market by that measure after Brent crude. Open interest for EU carbon contracts aggregated across all expirations as of March 1 was 643,000 contracts, compared with 416,000 on the same day last year, according to data from ICE Futures Europe. Interest in carbon has surged as the bloc begins to sell nearly all allowances to power utilities rather than giving most of them for free. They have plunged 46 percent in the past year, on concern about oversupply. They’ve rebounded by more than a third since Jan. 4, when they reached a record low. “Among energy markets, carbon is the second most liquid after crude” in Europe, said Mark Owen-Lloyd, head of carbon trading at CF Partners (U.K.) LLP in London. “Banks, utilities, proprietary traders can all access it and they do,” Owen Lloyd said in an interview March 1, citing volumes on ICE Futures Europe and open interest. “As a proxy for the energy markets, carbon is the best way in.” Brent crude open interest was 1.1 million contracts on March 1, up 25 percent from 882,000 a year earlier. Gasoil was at 529,000 contracts, 24 percent less than the year earlier’s 693,000.

World Bank Says Carbon Fund May Shrink Following Price Slump - Bloomberg

A World Bank Group unit says its fund for investing in carbon projects that generate emissions credits after 2012, when the first commitment period of the United Nations’ Kyoto Protocol ends, will probably shrink. The International Finance Corp. said its Carbon Facility Fund, which had raised 150 million euros ($198 million) when it closed in June, was suspended by November after plummeting UN offset prices triggered a measure to protect projects supplying the credits. Investors will probably scale back their commitments to the fund, according to the corporation. “I think the fund size will reduce,” Vikram Widge, head of climate financial products at the IFC in Washington, said in a March 2 telephone interview. “Watching where the market settles is the prudent thing to do.” The bank’s unit is looking at ways of changing the structure of the fund and will make a decision around the end of the month, he said. JPMorgan Chase & Co (JPM), Royal Dutch Shell Plc (RDSA), and Mercuria Energy Group Ltd. are among investors that committed to the fund, which will provide credits that may be eligible for use in the European Union carbon market. United Nations carbon prices lost 60 percent in the past year as industrial production stagnated and climate talks struggled to achieve progress on reaching a global agreement to reduce carbon emissions. UN carbon credits for delivery in December fell below previous record levels on Oct. 13 on the ICE Futures Europe exchange in London and plummeted as low as 3.28 euros a metric ton on January 16. The contract traded as high as 13.60 euros last year and was down 1.1 percent today to 4.66 euros as of 8:36 a.m. local time.