Verdantix: The Looming Emissions Exchange Battle
Press Release -- For Immediate Release
London, UK. April 28, 2008. Competition between carbon emissions trading exchanges is dramatically different in 2008 compared to previous years, according to new analysis from Verdantix. A flurry of investments by heavyweight exchange operators such as NYMEX and NYSE Euronext has transformed an entrepreneurial market into a battle ground between well-funded market leaders.
"In 2005 firms like Powernext and Nord Pool launched innovative carbon emissions financial instruments based on the EU’s emissions trading scheme." said Verdantix director David Metcalfe. "But in late 2007 the big investments by firms like OMX NASDAQ in Europe and NYMEX in the US transformed the emissions exchange market."
Verdantix selected seven emissions exchanges for comparison based on their many-to-many business models and actively traded carbon contracts such as EUA options and CER futures. The analysis, based on 23 evaluation criteria including membership numbers, liquidity and technology platforms revealed that:
- ECX/ICE and EEX/Eurex lead the market. These two exchanges, through their mix of product innovation and established derivatives markets, offer a wide array of EUA and CER contracts, have strong member bases and liquidity. To date ECX/ICE has achieved high market share in derivatives contracts. We anticipate this strong position to be challenged by the new entrants.
- Previously strong Nord Pool / OMX faces uncertainty. Nord Pool’s international power derivatives business was one of the first to launch emissions contracts. In December 2007 Nord Pool sold its international power and emissions unit to OMX which was itself acquired in early 2008 by the NASDAQ group. Three years of development could be lost in the integration challenge.
- Bluenext is a successful specialist with growth plans. Bluenext is the rebranded Powernext, one of the early carbon market innovators, that was acquired by NYSE Euronext and Caisse des Depots. It achieves a high score on market momentum from its 63% share of the EUA spot market in 2007. But with Phase 2 EUAs not yet allocated, Bluenext urgently needs to drive volume growth from its recently launched EUA and CER futures.
- Climex, NCDEX and Green Exchange are entrepreneurs. When the music stopped Climex was the only remaining many-to-many exchange without a heavyweight partner. Prospects look tough. The Green Exchange, launched by NYMEX and Evolution Markets, will mount a strong challenge as it is backed by Wall Street’s finest. India’s commodities exchange, NCDEX could play a key role as a host country for Clean Development Mechanism projects.
"Our analysis does not support the prevailing wisdom that emissions exchanges will consolidate in 2008" said Metcalfe. "To the contrary we believe the recent investments and joint ventures by well-established exchanges herald two years of intense competition. The ECX/ICE combination will face its first real test from powerful, well-funded competitors."
The report, "Green Quadrant: Emissions Trading Exchanges Assessed And Compared" can be purchased online and is available to Verdantix clients at www.verdantix.com
Verdantix is an independent business research firm focused on climate change, carbon markets and corporate responsibility. For more information please visit www.verdantix.com
David Metcalfe, Director, Verdantix Ltd. +44(0)207 851 9143. firstname.lastname@example.org
Sunday, 27 April 2008