Climate Exchange: Uniquely Positioned to Benefit Carbon Credit Trading Expansion

As an alternative to the pure-play carbon credit generation and trading companies such as Camco (CAMCF.PK), EcoloCap Solutions [OTCBB: ECOS], and EcoSecurities Group (ECGUF.PK), investors who are bullish on the future of carbon credit trading might also consider an investment in UK-based Climate Exchange (CXCHF.PK).

The accompanying charts highlight the six-month performance of Climate Exchange, the US Oil Fund ETF (USO), Camco, and the S&P 500 Index. Below the stock chart is a four-month chart of EU Allowances (EUAs) (82%) and Certified Emission Reductions (CERs) (18%), which represent the two most liquid and relevant means of trading carbon credits, which are tracked by the iPath Global Carbon ETN (GRN) at the indicated percentage weightings. The global carbon ETN also expects to incorporate new carbon credit trading vehicles as they become established, based on information provided at the product website.

As its name implies, Climate Exchange is engaged in developing financial exchanges that allow for the trading of environmental financial vehicles such as the carbon credits tracked by the iPath Global Carbon ETN. The Company’s three main businesses include the European Climate Exchange [ECX], the Chicago Climate Futures Exchange [CCFE], and the Chicago Climate Exchange [CCX]. The ECX operates an exchange for the European Emissions Trading Scheme while the CCFE handles environmental futures contracts in the US and the CCX operates the voluntary, contract-binding cap and trade system to reduce the emission of greenhouse gases.

Climate Exchange closed today at 1,645 pence with a market value of just over $1.4 billion [USD] and a robust stock price performance this year, as illustrated in the six-month chart. Last month, the Company reported increased trading volumes at its two primary exchanges (ECX + CCX) from the year-ago period as well as progress with international expansion plans into Canada and emerging markets such as China.

Climate Exchange reported 1H08 trading volumes on the ECX gained 250% while volumes on CCX advanced nearly 400% versus the year-ago period. Morgan Stanley analyst Luciano Diana has a neutral rating and 1,900 pence price target on Climate Exchange -- viewing the Company as the largest pure-play exchange in an emerging and fast-growing market for carbon credit trading with major expansion potential in the US market despite the threat of nationalization of carbon trading in the domestic market.

Comments

[slaterdomite:]

I dont think the market for carbon credit trading is a sure thing in the U.S.. The masses are awakening to the idea that anthropogenic global warming is questionable. Despite what the two presidential candidates profess, carbon allocation (with trading to follow) is further out than the next election cycle. The science is NOT settled here. Thank God.

2008 Aug 18 08:34 AM

[longtermstocks:]

I agree with slaterdomite, and I would much rather see the free market take the lead than the government.

2008 Aug 18 12:01 PM

[300mph:]

slaterdomite, don't thank God, thank science. Science will win, eventually, over politics.

Wow a speculation vehicle where the valve is based on the climate changing. How could you lose with this one?

2008 Aug 18 12:56 PM

[Dirtt:]

Jamie Dimon is telling clients to go long Unicorn futures.

Thomas Lee pulled himself off the sword long enough to state that the number of the Bigfoot sightings will be higher twleve months from now due to the strength of the dollar and weakness in Canadien whatevers.

I know how to get America out of debt. Sell California to Mexico. They are taking it anyway. Let's just dish it out like we did Japan with downtown LA property in the 80's. East of the 405 of course

We rid ourselves of the Ninth Circuit. Huge debt. Pathetic legislature.

2008 Aug 19 02:54 AM

[User 149255:]

Funny how a benign post like this brings the conversative wackos out of the woodwork.

Using words like "anthropogenic" only makes your statement more ridiculous and ignorant, by the way.

2008 Aug 19 07:22 AM

[Alan Young:]

I've been trying to buy the stock on OTC ticker CXCHY, but nothing trading.

2008 Aug 19 05:58 PM

[Mike Havrilla:]

You would probably need to open a global stock trading account with E*TRADE to buy shares of Climate Exchange (London: CLE). Many of the smaller ex-US stocks don't trade often or at all even if you find a pink sheet ticker such as CXCHY.

However, while E*TRADE offers investors the opportunity to invest in foreign markets such as London and others; my own experience with this system is disappointing. First, strength in the US Dollar will impact investment returns since trading in the foreign markets only occurs in the local currency. Secondly, in my experience I was not able to place a trade online for the stocks and foreign markets that I attempted to place and had to call a broker for assistance, but he entered the order wrong and it was never filled. Finally, the currency conversion does not carry a commission, but you will not receive a favorable rate; so E*TRADE makes money on the spread between the real-time currency conversion ratio and what they offer to retail investors.

Since I no longer use my E*TRADE global account, I wrote the following article for a trading strategy for carbon credit companies:
mikehav.blogspot.com/2...

2008 Aug 19 06:09 PM