September 17, 2010 / 3:36 PM / 9 years ago

BNY Mellon expands into U.S. environmental markets

* Providing trust, servicing for state energy credits

* Eyes further business with future programs

By Elinor Comlay

NEW YORK, Sept 17 (Reuters) - Bank of New York Mellon (BK.N) is processing trades in the fledgling U.S. carbon credit market, as part of a wider effort to boost its traditional business of serving as a trustee for investments and trades.

The bank is offering record keeping, processing and other services to buyers and sellers of renewable energy credits created for U.S. state programs, said James Balsan, managing director of environmental financial markets.

A secondary market in the credits has begun but there is little price transparency. That creates a need for third parties such as BNY Mellon to offer processing services for buyers and sellers of the instruments, BNY Mellon’s Balsan said.

BNY Mellon about a year ago appointed Balsan, previously managing director of new business development in its shareowner services unit, to coordinate the bank’s environmental push in the United States, building from a business it developed for carbon trading in Europe several years earlier.

The U.S. services are provided by BNY Mellon’s existing business units, under Balsan’s coordination.

Federal efforts to create a national carbon trading market failed this summer. [ID:nN31258153]

“The absence of federal legislation on carbon doesn’t help us,” he said, but he noted the bank is seeing substantial business from existing projects.

BNY Mellon is in talks with various state entities to provide them with carbon registries, for example, and the bank’s West Coast clients are interested in the prospects for a trading program there known as the Western Climate Initiative.

That program faces challenges especially in California, its biggest state. But it has the potential to issue $4 billion in securities annually, Balsan said.

Existing state-based renewable energy programs vary, but most force utilities to get a certain amount of power from renewable energy by a certain date.

They can generate this energy themselves, obtaining a renewable energy credit for each kilowatt hour of renewable energy generated, or — if they are not able to meet their targets — they can buy these credits from other renewable energy generators. Individuals and institutions are also able to buy the credits to bet on a price rise, expecting utilities’ renewable energy requirements to increase and demand to outstrip supply. (Reporting by Elinor Comlay; Editing by Steve Orlofsky)

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