SOURCE: Barclays Capital

Barclays Capital

February 17, 2009 11:25 ET

Barclays Capital Executes Forward Trade Agreement for US Carbon Markets

Initial Trades Executed Individually With Calpine Energy Services, L.P. and Royal Bank of Canada; Documentation Template Made Available to Market to Further Liquidity and Transparency in US Carbon Trading

NEW YORK, NY--(Marketwire - February 17, 2009) - Barclays Capital, the investment banking division of Barclays Bank PLC, today executed its first trades on a forward trade agreement which includes provisions for US emissions allowances associated with the Regional Greenhouse Gas Initiative (RGGI), the first mandatory carbon cap-and-trade program in the United States. To facilitate further development of the US carbon market and to promote the standardization of contract terms used for carbon cap-and-trade transactions, Barclays Capital is making the forward trade agreement available to the entire marketplace.

The U.S. Emissions Allowance Transaction Annex, as published by the International Swaps and Derivatives Association, Inc. (ISDA), has previously been used to document forward transactions of SO2 and NOx emissions allowances. Barclays Capital, in consultation with Calpine Energy Services, L.P. and with Royal Bank of Canada, modified this existing documentation to include provisions which mitigate price and delivery risks associated with RGGI allowances. These risks, and a lack of standardized documentation, have thus far constrained the development of a robust secondary over-the-counter (OTC) market for RGGI allowances.

Unlike the emissions cap-and-trade programs which have been operating in the US since the mid-1990s under the administration of the federal Environmental Protection Agency (EPA), RGGI is an independent program established by 10 Northeastern states. The RGGI program therefore has different rules and delivery mechanisms which required modification of the previous US emissions documentation.

"We are pleased to execute the first carbon emission allowance trades in the US employing this new contract," said Louis Redshaw, Head of Environmental Markets at Barclays Capital. "As a pioneer in developing standardized agreements for environmental markets in the European Union, and in the absence of documentation from relevant trade associations, we believe we have the experience required to construct a contract that will support all participants in the RGGI trading scheme."

James Macintosh, US Emissions Trading for Barclays Capital, added, "Standardized documentation is a crucial step in the development of liquidity of not only RGGI but of any eventual federal carbon cap-and-trade program. The RGGI program is already off to a promising start, with trading volume increasing as the first emissions compliance period progresses. We believe this contract will provide further liquidity and transparency as a complement to the existing exchange-cleared market."

Barclays Capital will make the agreement available to the marketplace through OTC brokers and direct distribution.

About Barclays Capital

Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a comprehensive set of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs 20,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide. For further information about Barclays Capital, please visit our website

Notes to editors:

Barclays Capital has been at the forefront of emissions trading since the inception of the European Emissions Trading Scheme, and has dedicated emissions trading desks in New York and London covering the US and EU emissions markets. Barclays Capital has played a key role in the drive toward industry standard documents:

--  concluded the first-ever trade using the industry standard documents
    published by the International Swaps and Derivatives Association (ISDA)
    (July 2004)
--  the first bank to take delivery of physical CO2 allowances under a
    spot market trade (May 2005)
--  executed the first financial emissions trade to use the new London
    Energy Brokers Association (LEBA) carbon index as a reference price (May
--  the first bank to take delivery of Certified Emission Reductions
    (CERs) into a temporary holding account on the UN's CER registry (May 2006)
--  the first bank to develop standardized secondary market CER trading
    documents, in consultation with other market participants (October 2006)
--  the first in the market to deliver CERs into an EU registry the day
    the International Transaction Log (ITL) went live.

Barclays Capital has also been recognised as a key player in the emissions trading market through various industry awards.

The Regional Greenhouse Gas Initiative

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by ten Northeast and Mid-Atlantic states to limit greenhouse gas emissions. RGGI is the first mandatory, market-based CO2 emissions reduction program in the United States. To reduce emissions of greenhouse gases, the RGGI participating states use a market-based emissions auction and trading system where participants can buy, sell and trade CO2 emissions allowances. Participating states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont.

Emissions trading at Barclays Capital

Barclays Capital is a leading provider of financial and commodity risk management solutions to industry, funds and investors. Barclays Capital has quickly established itself as an award-winning liquidity provider in the environmental markets by applying our banking experience in the following areas:

-- Market access and intermediation: the provision of a 'route to market'
   for participants looking to buy and sell allowances and project
   credits in the following key schemes:
   - The Regional Greenhouse Gas Initiative (RGGI)
   - SO2 / NOx Cap-and-Trade Programs
   - EU Emissions Trading Scheme (ETS)
   - Clean Development Mechanism (CDM)
   - Joint implementation (JI)
-- Risk management and structuring: the development of trading strategies
   and risk management products enabling market participants to manage the
   volume and price risks associated with their emissions portfolios
-- Financing and investment: the provision of debt and equity finance for
   emission reduction projects and the provision of finance against
   emission allowance holdings
-- Investor solutions: Barclays Capital launched some of the first
   investment vehicles to meet the needs of investors' growing appetite
   for exposure to greenhouse gas prices. In December 2007, Barclays
   Capital launched the BGCI, the first global carbon index of its kind,
   giving investors access to the global carbon markets.