Trading volumes down, companies polluting less
Jessica Cheam, Straits Times 21 Mar 09;
THE tough economic environment is set to put a spanner in the works for Singapore's ambition to be Asia's carbon trading hub.
Carbon experts in Singapore said this week the price of carbon - now trading around 10 to 12 euros per tonne from its high of 30 euros - has been depressed along with crude oil prices this year on lower trading volumes, as companies are polluting less amid the worsening recession.
Also, the scheduled opening early this year of the Singapore Mercantile Exchange (SMX) - a commodities futures exchange that was due to offer carbon trading - has been delayed.
A spokesman for SMX, which will trade futures contracts in energy, metals and agricultural products, told The Straits Times that demand will determine whether the exchange will eventually offer carbon trading.
'Carbon credits could be one of the products which may be offered,' said the spokesman.
London-based fund manager Climate Change Capital's head of carbon finance, Mr Michael Brown, said there are fewer buyers of carbon credits as companies pollute less, and the tight credit situation worldwide has led to less financing of carbon credit projects - such as in renewable energy, which cuts emissions - which are in turn traded on a global carbon trading market.
Singapore still has a long way to go to realise its carbon hub ambition as there is no liquidity in Asia's carbon market at present, said Mr Brown on Wednesday, at a carbon workshop organised by the British High Commission.
Governments may also have to offer incentives to kick-start a carbon market in Asia, perhaps by requiring heavy industries to buy credits, he suggested.
However, Mr Shane Spurway, head of carbon banking at Fortis Bank, said in a separate interview that opportunities do exist to invest in good carbon credit projects despite the tight credit market.
The global carbon market grew significantly in both volume and value last year, bucking the downturn which has depressed most global commodity trading.
Carbon trading shot up 83 per cent last year over 2007. The market's total value for last year was estimated at US$125 billion (S$191 billion), more than double that of 2007, he said.
Both experts are optimistic that United States President Barack Obama's support for a cap-and-trade system will boost the global carbon market.
