Barclays rebuilds carbon trading desk amid global net-zero push


Retreated from carbon trading for over a decade, Barclays Plc is trying to come back to market and appointed a veteran of Shell Plc, Oliver Morning, to run the operations, according to Bloomberg report.

Morning is expected to be the head of carbon and environmental products trading of Barclay and bring significant profits as many other hedge fund managers, private equity firms and bankers hope for.

“It wasn’t that long ago Barclays wanted out of anything that smelled like a physical commodity, so this hire represents a sea change,” Philip Hardwick, who has held positions in carbon units at both Barclays and JPMorgan Chase & Co., said.

Carbon trading’s ascent within commodities desks is the indicator of the financial market shifting. As climate regulation improving and increasingly stringent, more companies are forced to slash their carbon footprints. Especially, those run out of time to make real emissions reductions are turning external levers such as carbon credits to meet zero targets.

Trading carbon may help Barclays access credits to cut its own emissions but it’s more important to have the tools to feed growing corporate demand for pathways to net zero. Bain & Co., the Boston-based consultancy, says carbon markets represent multiple business opportunities for banks. And recent forays into the market include a deal by UBS Group AG, Canadian Imperial Bank of Commerce, BNP Paribas SA and six other banks to provide seed capital for a carbon-credit startup.

It’s not unusual for major banks to have had an on-again-off-again relationship with carbon trading. JPMorgan sought to build presence but ended up backing away when carbon price tanked in the 2010s and as post-2008 financial regulations became more stringent. Though Barclays goes back to the market, there are risks piling up with greenwashing scandals has already burned some of the world’s biggest commodities trading houses.

As higher carbon price against some companies’ development, the U.S. state government is trying to find the balance. Washington states attempts to merge its fledgling carbon-pricing market with another one operated by California and Quebec in hopes of further slashing greenhouse gas emissions and settling the high prices of pollution allowances. Laura Watson, director of Washington’s Department of Ecology, announced her decision to pursue market linkage this Thursday morning. “This decision is just the beginning of an extensive process,” Watson said. “We anticipate that these discussions could require a year or more to complete.”

In Washington, the auctions in which the allowances are sold have raised nearly 1.5 billion dollars. But polluters have also passed at least a portion of those high allowance prices on to consumers, resulting in higher gas prices. While gas prices in Washington have come down from a peak of more than 5 dollars in September, they’re still more than a dollar above the national average. State officials have estimated the carbon market has added between 25 and 35 cents to Washington’s gas prices.

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