New Carbon Trading Platform Promises Liquidity and Transparency
Markit Environmental Registry and Carbon Trade Exchange (CTX) yesterday launched the integrated Carbon TradeXchange, which creates a bridge between users' Markit registry accounts and the trading platform. This allows participants to select voluntary emissions reductions (VER) in their registry accounts for sale on a "spot" basis on the exchange.
"We've been working vigorously behind the scenes and discussing with Markit to put together that electronic link between the exchange and the registry to allow a seamless transaction interface in the voluntary carbon sector," says CTX CEO Wayne Sharp.
Unsurprisingly, the exchange interfaces with brokers and emissions reductions projects, enabling them to view real time offers, bids and credit availability. Sellers can operate through a broker or sell directly on the exchange.
In addition, the exchange will allow companies of all sizes to join the exchange, each with varying levels of access to the exchange interface. For corporate members, the exchange will accommodate individual member trading desks and aims to facilitate corporate branded "carbon communities."
Explains Sharp," We've also created a carbon community for corporations, where they can get paid part of our commission off the carbon trading for their clients if they want to facilitate it and promote it."
Additionally, the exchange offers a retail option that doesn't require exchange membership.
Markit CEO Helen Robinson says that the quest for liquidity drove Markit and CTX to pursue the integration.
"Our primary focus is, '... What is it that we can do as an organization to ensure transparency and to ensure liquidity?'" she says.
Sharp alluded to the recent European struggles with credit legitimacy -- including the recent international sale of "used" CERs -- to highlight the need for greater market liquidity and transparency "... so we don't have to worry about the aspect of what are the real credits available and make sure there is no possibility that they're sold twice, or make sure there was no question over the legitimacy of the credit."
The allies hope that their electronic user interface with the integrated registry and exchange will foster greater transparency.
"Business Needs to Take the Lead"
Markit and CTX announced their integration at the Wall Street Green Trading Summit, held this week in New York City. Challenging the general sentiment among conference-goers that carbon markets and cleantech have become dependent on regulatory drivers for growth, Sharpe seized the platform of the announcement to issue a call to arms for those in green finance and environmental markets.
"The time has come for business to take the lead. Why the heck did we start waiting for governments to tell us how to do business?" Sharp said. "Business creates markets and the governments come along later and decide how they might or might not regulate it."
He continued, "Well, as far as I'm concerned we have that opportunity -- business needs to take the lead."
In an interview with Ecosystem Marketplace, Sharpe further discussed his vision for how the exchange -- and the voluntary market as a whole -- will exist alongside any future compliance scheme.
Sharp seemed optimistic about potentially integrating the global platform with regulations, stating, "I think that a lot of regulatory agencies, once they realize this is a legitimate exchange mechanism, a legitimate credit mechanism, will say, 'Well, we'll allow that as an offset mechanism for the bigger emitters that are a part of our regulated scheme.'"
Speaking about the future interaction between voluntary markets -- the target audience for the Carbon TradeXchange -- and a potential US compliance market, Sharp observed, "There's no possible chance there's enough supply to meet the demand for the offsetting required to meet their (Senate legislation) models and in line with their national targets."
Relating the potential dearth of offsets to the newly integrated exchange, Sharp continued, "They have to be trading on an international level and to do that, you have to be buying voluntary credits on a global platform.
"If not, it's going to be all over-the-counter trading, which is too laborious and too costly, and just is inefficient," he concludes.
Molly Peters-Stanley is the voluntary carbon associate at Ecosystem Marketplace, where this article first appeared.
Image CC licensed by Flickr user Katrina.Tuliao.