U.S. exchanges explore carbon trading

By Anupreeta Das

NEW YORK (Reuters) - Some of the biggest U.S. exchanges are eyeing a piece of the global carbon trading market, which is expected to double in size by 2012 from current levels as governments and industry step up efforts to reduce pollution.

The market for trading carbon emissions reached 22 billion euros ($32 billion) in 2006 and will cross 40 billion euros ($58 billion) by 2012, according to a report by Boston-based research firm Celent.

"The opportunity is that it's a new product area that's not traded very heavily on exchanges right now," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods.

"Lots of exchanges are likely to come up with different structured products to participate in that market," she said.

Analysts said carbon trading is likely to be among the slew of lucrative new products that exchanges are racing to offer customers. Exchanges the world over are buying stakes in each other to take advantage of new technologies that allow customers to swiftly trade a variety of products, from currency options to weather futures, across national boundaries.

New York Stock Exchange operator NYSE Euronext recently said it has partnered with French bank Caisse des Depots (CDC) to launch a carbon trading market in early 2008.

The market will allow trading and settlement of carbon dioxide allowances and credits, which can be bought and sold like any commodity.

NYSE Euronext spokesman Stefane Flex said further details will be presented at the United Nations' panel on climate change next month.