Monday, March 17, 2008

NYMAX Carbon Market and Oil Prices

The New York Mercantile Exchange (NYMEX) opened its carbon exchange today, competing with the Chicago Climate Exchange and the markets in London. The Green Exchange, as it is called, offers trading in global carbon-based contracts, such as carbon allowances under the European Union Emissions Trading Scheme (EUAs), carbon credits under the U.N. Clean Development Mechanism, and verified greenhouse gas emission reductions used in accordance with voluntary carbon standards. EUAs closed at 21.90 euros per metric ton.

This seems almost superfluous compared with the price of oil. I think a barrel of crude is equivalent to about 1/3rd of a metric ton of carbon dioxide. And the experts don’t expect that price to come down. For the first time ever, all futures through 2016 are trading at over $100 a barrel. The Financial Times quotes Jeffrey Currie of Goldman Sachs predicting prices as high as $175 a barrel.

Meanwhile Dick Cheney is in Saudi Arabia trying to persuade them to increase their production. This is pure theater, because Cheney is well connected in the oil business and must know the Saudis’ dirty little secret; they are already pumping all they can.

No comments: