Carbon markets 'need to have central bank'



Carbon markets need tighter regulation to improve their stature among investors, analysts say.
"The only way really to turn this into a proper market is to have a central bank," said Michael Liebreich, the head of Bloomberg New Energy Finance in London. "They have not realised you are sort of creating a currency. This is no different from the euro."
The price of carbon emissions, which are traded by the tonne on futures markets in Europe and North America, have implications for both environmentalists and energy companies.
If carbon prices rise, that could make capital-intensive projects such as carbon burial economically viable in Europe without government incentives, analysts say.
Carbon futures markets are based on the emissions credits sold to companies in Europe through the EU's Emission Trading System and global carbon offset schemes such as the UN's Clean Development Mechanism, which gives credit for projects such as solar parks in developing countries.
The Emission Trading System has suffered from at least four online attacks in the past seven months, the last of them involving a theft of emissions credits, valued at more than US$30 million (Dh110.1m), last week.
The market's regulator, the European Commission, temporarily shut down the credit registries last week while it reviews online security measures at separate country registries, which are scheduled to be centralised by 2013.
But Europe needs to exert more control over the number of credits in the market in addition to strengthening online security, Mr Liebreich said.
"When do I think there'll be a global price on carbon that'll be a real driver for people's investment decisions?" he asked. "The answer is: not in my lifetime."
Abu Dhabi hopes to take advantage of fledgling carbon markets through its clean energy company Masdar. The company has registered four carbon offset projects under the UN's system and is evaluating other overseas projects.
"More worrying for us is the short-term impact on market confidence but we are confident that this is a bump on the road to the establishment of a mature carbon market," said Philip Moss, who manages Masdar's carbon portfolio.
"Any withdrawal of players from the market due to this incident should make our positions more valuable."
 
ayee@thenational.ae

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