Clearstream to launch global emissions market access

Clearstream to launch global emissions market access

17/12/09

Clearstream, the international central securities depository within Deutsche Boerse Group, is launching Global Emissions Market Access (GEMA), a settlement and custody service for carbon trading rights.

GEMA is aimed at financial institutions interested in carbon trading rights without the burden and risk of manual settlement of trade. As of February 2010, it will leverage Clearstream’s existing connectivity and applications by simply making carbon rights - European Union Allowances (EUAs) and Certified Emission Reductions (CERs) –eligible in Clearstream Banking (Luxembourg). GEMA thereby provides customers with access to a new market without requiring any system developments or new back office processes. Identification codes for carbon rights will be allocated using industry recognised formats as for any other security eligible in Clearstream.

According to the World Bank, the volumes of traded carbon rights worldwide doubled to € 86 billion in 2008 compared to € 43 billion in 2007. The European Union Emissions Trading Scheme and the Clean Development Mechanisms currently account for the great majority of traded volumes.

Carbon emission rights trading is a way of controlling pollution by providing an economic incentive for reducing levels of carbon dioxide emissions. A cap is set on the total amount of emissions any given installation may produce.

Installations reducing their emissions are able to sell their excess rights to others, resulting in a financial reward for protecting the environment.

Financial institutions active in this market can act as intermediaries but also hold and trade proprietary positions.