Bank of America buys into carbon trading

London, 26 July: Bank of America has taken a $10 million stake in Climate Exchange as part of plans to expand its emissions trading business and launch products linked to carbon offsets.

The transaction gives Bank of America a 0.5% holding in Climate Exchange, the London-listed company that owns carbon trading exchanges the Chicago Climate Exchange (CCX) and the European Climate Exchange (ECX).

The deal accompanies a joint venture between the two parties to develop carbon-related products, using CCX and ECX offsets, for Bank of America's clients. If the joint venture generates "sufficient" revenues, the bank will earn the right to acquire a further $25 million stake in Climate Exchange.

Earlier this year, Bank of America announced a $20 billion ten-year sustainability and climate change initiative that involves developing new environmental products and services. These could include credit cards and mortgages that will offset clients' carbon emissions by buying and cancelling carbon credits.

"Helping individuals and corporations understand their carbon footprint, hedge against it and reduce emissions to reach carbon neutrality is of paramount importance in achieving an environmentally sustainable economy," said Richard Prager, head of global rates, currencies and commodities at Bank of America.

In an extension of its emissions trading business, Bank of America will become a member of the CCX and will join the ECX and the soon-to-be launched Chicago Climate Futures Exchange.

"We will provide liquidity and make markets in carbon emissions on all three exchanges, and plan to expand to include sulphur dioxide and nitrogen oxides emissions," said a Bank of America spokeswoman.

Carbon emission credit trading will be managed within the Bank's commodity arm by New York-based head of commodities, Paul Broderick.

Separately, the bank has committed to buy a minimum of 500,000 tons of carbon credits from the exchanges for use in its customer programmes.

The bank previously committed to reduce its emissions as part of the US Environmental Protection Agency's Climate Leaders programme, but it now faces a stricter commitment as an emitting member of the CCX, to reduce emissions by 6% by 2010, against a year 2000 baseline.