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Mck Carbon Assets

Mck Carbon Assets

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Published by: himarc76 on Nov 03, 2010
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07/29/2014

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f i n a n c i a l

s e r v i c e s

DECEMBER 2008

Banking on carbon assets
A new regulatory environment for greenhouse gas emissions could hold good news for banks.

James D. R. Twining

By helping to transform today’s assortment of mainly OTC deals into tomorrow’s global commodity.For the foreseeable future. About the Author James Twining is an associate principal in McKinsey’s London office. regulators have created a new asset class—carbon allowances. issues allowances to companies in the industrial and energy sectors. By participating in those transactions. and Deutsche Bank.com “Business strategies for climate change” “From risk to opportunity—How global executives view sociopolitical issues: McKinsey Global Survey Results” Copyright © 2008 McKinsey & Company. Related Articles on mckinseyquarterly. the global financial-services sector will be wrestling with the grim realities of credit losses. 1 . Merrill Lynch. and contract terms. stipulating that companies can emit capped levels of carbon emissions during the year. The European Union. deleveraging. for instance. the provisioning of liquidity. All rights reserved. a mere drop in the bucket compared with the losses many banks currently face. including Barclays. Firms hoping to participate in these new markets have a critical role to play today in the creation of universal standards for market transparency. which had a market value of about €65 billion in 2007. banks could gain revenues of €3 billion to €5 billion. These figures. Enterprises that overshoot their allowances can buy supplementary ones from companies that have a surplus. China is discussing plans for a similar scheme. Trading volume could grow to €2 trillion by 2020—more than double the size of the global commodities derivatives market in 2007. and challenges to traditional business models. and the development of regulation to encourage large-scale trading by blue-chip companies. Many banks. it would be easy to lose sight of a nascent but significant long-term opportunity: facilitating carbon trading. and the United States may introduce one soon as well. are almost half of the annual trading revenues realized in 2006 by banks across all commodities. already profit from trade in this new asset class. With dramatic industry restructuring already underway and a clear need for players to concentrate on the here and now. banks earned around €500 million in revenues last year. By placing a value on greenhouse gas emissions. product specifications.

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