UK’s controversial emissions market sees first trades

The UK’s new government-sponsored greenhouse gas emission trading scheme (ETS) has seen its first trades since its launch on February 2. An anonymous deal was traded yesterday between a global oil major and a large industrial company. London-based staff at brokerage TFS handled the deal.

The industrial company – one of 34 successful bidders in the UK government’s auction of four million tonnes of carbon dioxide equivalent Co2 allowances – bought a “significant amount” of credits from the oil major, sources said.

Almost immediately after this first trade, energy company BP went on record with a much smaller trade via ETS – one of a few it said it made that day. In this public trade, BP sold 1,000 carbon credits to Imerys, the international minerals processing group.

The UK’s system is the first national emissions trading programme, and the British government hopes London will become the world’s leading market-place for emissions. But recent criticism by industry experts has made potential ETS market participants cautious.

London-based trade magazine, Environmental Data Services, has described the UK’s new system as “badly compromised” by compensation payments promised to companies by the government as an incentive for reducing emissions. The magazine claimed a number of companies will receive compensation for emission reduction, even though their emission levels are falling purely due to economic difficulties.

One London-based broker claimed companies were cagey about using ETS due to the controversy. “The oil major in the first deal stayed anonymous as it wouldn’t want to be seen as profiteering,” said the broker. He was also sceptical of companies’ motives for being involved in the scheme: “For many of these companies it’s all to do with corporate image. They want to be seen doing something in the green arena. BP will reduce emissions in many more effective ways than trading these emissions,” he added.

But John Molloy, head of environmental products at TFS, refuted such claims. "We believe this deal proves that ETS is more than a symbolic presence,” he said. “Contrary to some doubters, it has a place in the global drive to reduce greenhouse emissions.”