Barclays Bolsters Carbon Trading Position with Tricorona Purchase

by | Jun 3, 2010

Barclays plans to buy carbon trading firm Tricorona for 1.13 billion Swedish kronor ($145 million), which will position the U.K. bank as a leading global origination and carbon trading house, reports Market Watch.

Tricorona sources, develops and trades carbon offsets from greenhouse gas (GHG) reduction projects in developing countries, a market established by the Kyoto Protocol’s Clean Development Mechanism (CDM), reports The Independent.

The deal represents a vote of confidence in the carbon market by Barclays despite the market’s uncertain future beyond the expiration of the Kyoto Protocol in 2012, says The Independent.

Barclays is not the only investment bank looking for a piece of the $144 billion carbon market, reports Reuters.

There are three primary ways that investment banks can participate in the carbon market. They are buying and selling emissions rights for corporate clients to profit from bid-offer spreads, proprietary trading with their own money, and investment in carbon offset development under CDM, says Reuters. Investments include forest protection carbon project origination (REDD), voluntary carbon markets, and NYMEX’s Green Exchange.

In addition to Barclays, several banks including Bank of America Merrill Lynch, Citi, Deutsche Bank, Fortis Bank Netherlands, Goldman Sachs, JP Morgan, Morgan Stanley, Nomura, and Societe Generale are all currently participating in the carbon market, according to Reuters.

Carbon market players said they will consider developing self-policing mechanisms after a call to action by the UN’s new climate chief, Christiana Figueres, who officially starts her new role in July, due to several scandals last year including allegations of carbon credit theft, tax fraud and trade in recycled credits.

Figueres also criticized investors for not contributing to sustainable development or improving the quality of life for families in developing countries, citing in the article the CDM as an example, which funded only half as many emissions cuts last year compared to 2008.

Her recommendations call for companies to invest in more projects that distribute green products such as efficient light bulbs and clean-burning stoves to large numbers of poor families, and for audit firms to “staff up” to cut delay times.

But investors including the Carbon Market & Investors Association (CMIA) said private sector funding won’t be forthcoming without regulatory certainty for investors, says Reuters.

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