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Back to the (uncertain) future

Channels: Carbon, Markets, Renewables

Companies: Bluesource, Baker & McKenzie, Evolution Markets, Endurance Global Weather, Karbone, South Pole Group, Ruby Canyon Engineering

People: Kevin Townsend, Izzet Bensusan, Rick Saines, Zac Eyler

Despite setbacks in some key markets, the winners of this year's Environmental Finance Market Rankings are generally bullish about the growth of existing trading systems and the creation of new ones

Our in-depth looks at each category will be published throughout this week

GHG Markets: Carbon markets face fresh uncertainty

Environmental markets rarely run smoothly for very long. This time last year, the winners in our annual Market Rankings were optimistic that much of the uncertainty that had bedevilled the markets in previous years had been dispelled by new regulations and reforms of key markets.

How the rankings were conducted:

Companies were emailed in October and asked to nominate the leading traders, brokers and service providers in the markets covering carbon emissions, renewable energy certificates, and weather and catastrophe risk, via an online survey. Voters were asked to vote only in those categories in which they had direct experience and to make their judgements on the basis of: efficiency and speed of transaction; reliability; innovation; quality of information and services provided; and influence on the market, not just the volume of transactions handled. More than 600 completed responses were received. Only one vote per company site was allowed and those firms that nominated themselves had their votes disregarded.

Click here to view the winners table

But, as most of these markets are created by regulation, so they can be destroyed by regulation or political change.

This year's major political upheavals – the UK's 'Brexit' vote and the victory of Donald Trump in the US presidential election – have not destroyed any markets, but have certainly cast a shadow over some.

But this year's winners remain generally bullish. "We're excited about the future," says Kevin Townsend at repeat winner Bluesource, a US developer of environmental projects. Among the company's goals for the next decade, is to "create as yet unknown environmental markets, products and services that lower the cost and improve the efficacy of beneficial environmental change.”

Not all the winners have such grand ambitions, but most are confident that market solutions to environmental challenges will continue to expand.

The big three winners in this year’s poll were the same as in 2015, with Baker & McKenzie the dominant law firm in carbon and renewables markets, Evolution Markets retaining its crown as top carbon broker, and Endurance Global Weather again voted Best Dealer globally.

Other multiple winners this year include US company Karbone and Zurich-based South Pole Group. Both won in two carbon categories and two renewables categories.

South Pole has taken on new staff during the year to enable it to help more countries implement their emission reduction plans submitted as part of the 2015 Paris Agreement. “We’re quite upbeat,” said a spokesman.

As is Karbone. Despite an excess of Renewable Energy Certificates (RECs) in some markets in 2016,“the RECs market continues to be an excellent mechanism for getting renewable energy projects online,” says CEO Izzet Bensusan.

A supply/demand imbalance also dogs the EU Emissions Trading System and the Brexit decision is another bearish influence on a market already struggling with allowance prices 40% down on a year ago.

But in the US, traders are generally optimistic that the California carbon market – the second biggest – will feel little impact from the election of a climate change sceptic as the country’s next president.

Trump’s victory makes it unlikely that president Obama’s Clean Power Plan will be enacted, but carbon market specialists are confident that several states will press ahead with the policies they developed to comply with the Plan.

"We’re expecting no aggressive action on climate change at the federal level," says Rick Saines, of Baker & McKenzie. But “there is still good momentum for carbon markets even with the uncertainty that Trump’s election has caused,” says Zac Eyler of Ruby Canyon Engineering, another repeat winner.

“California, Quebec, Ontario, British Columbia, etc. show no signs of slowing down their programmes over the coming years,” he adds.

Further afield, other countries are pressing ahead with emission reduction plans, in line with their commitments under the Paris Agreement, and in many cases, these involve carbon trading. Chief among them is the national Chinese market that is set to launch next year.

Implementation of the Agreement is creating plenty of new work for many of this year’s winners, much of it to do with the roll out of renewable energy capacity.

Plunging costs have helped stimulate rapid growth of wind and solar energy in recent years but this increase in supply has hit the price of RECs in the US. This was compounded by a relatively warm winter last year which depressed power demand in both Europe and North America.

In response, a growing number of European utilities are looking to use temperature-based weather hedges to protect their revenues. Most winners in the weather risk section of this year’s Rankings expect to see increasing use of more complex weather contracts to protect against low wind speeds and lack of sunshine.

They also point to the US agriculture sector as a promising growth area for weather hedging. This industry is also a major force in the expanding market for Renewable Identification Numbers which track the percentage of biofuel mixed into US transport fuel.

Airlines are also seen as a likely source of new business by many of this year’s winners, in light of the industry’s commitment to launch a new carbon offset market in 2021. And, with increasing interest in the use of markets to improve water supplies, reduce deforestation and even protect biodiversity, optimists think the future looks bright for environmental markets.

2016 winner table

CARBON MARKETS
EU EMISSIONS TRADING SYSTEM
 WinnerRunner up
Best broker, spot & futures Evolution Markets  
Best trading company, spot & futures ETS Markets Redshaw Advisors
Best broker, options Evolution Markets  
Best trading company, options ETS Markets CF Partners
Best advisory/consultancy Redshaw Advisors ETS Markets
Best law firm Baker & McKenzie  
Best verification company DNV GL Lucideon CICS
Best exchange/clearing house ICE Futures Europe EEX
NORTH AMERICAN MARKETS (California)
 WinnerRunner up
Best broker, spot & futures Evolution Markets Karbone
Best trading company, spot & futures Vitol BP
Best broker, options Evolution Markets Karbone
Best trading company, options Vitol Element Markets
Best offset originator Bluesource Element Markets
Best advisory/consultancy Karbone Element Markets
Best law firm Baker & McKenzie Stoel Rives
NORTH AMERICAN MARKETS (RGGI)
 WinnerRunner up
Best broker Evolution Markets Karbone
Best trading company Vitol Element Markets
NORTH AMERICAN MARKETS (All)
 WinnerRunner up
Best advisory/consultancy Karbone Element Markets
Best law firm Baker & McKenzie Latham & Watkins
Best verification company Ruby Canyon Engineering ESI Carbon
Best project developer Bluesource EOS Climate
KYOTO PROJECT CREDITS (JI and CDM)
 WinnerRunner up
Best trading company, secondary market South Pole Group Statkraft
Best advisory/consultancy Kanaka Management Services South Pole Group
Best law firm Baker & McKenzie  
Best verification company EPIC Sustainability Services TUV Nord
Best project developer South Pole Group  
Best exchange ICE Futures Europe  
WEATHER RISK
WEATHER RISK NORTH AMERICA
 WinnerRunner up
Best Broker Choice Energy Evolution Markets
Best Dealer/Structured Product Seller Endurance Global Weather Nephila Capital
WEATHER RISK EUROPE
 WinnerRunner up
Best Broker =Meteo Protect; =Willis Towers Wason  
Best Dealer/Structured Product Seller Endurance Global Weather Nephila Capital
WEATHER RISK ASIA
 WinnerRunner up
Best Broker Aon Benfield CQ Partners
Best Dealer/Structured Product Seller Endurance Global Weather Swiss Re
WEATHER RISK AUSTRALIA
 WinnerRunner up
Best Broker CQ Partners  
Best Dealer/Structured Product Seller Endurance Global Weather Nephila Capital
WEATHER RISK GLOBAL
 WinnerRunner up
Best Advisory/Data Service Speedwell  
Best Law Firm Reed Smith  
CATASTROPHE RISK
CATASTROPHE RISK MANAGEMENT GLOBAL
 WinnerRunner up
Best Dealer (Structurer/Arranger) Endurance Global Weather Swiss Re
Best Broker Willis Towers Watson  
Best Trading Company/Investor Nephila Capital  
Best Advisory AIR Worldwide  
Best Law Firm Reed Smith  
RENEWABLES MARKET
RENEWABLE ENERGY CERTIFICATES - NORTH AMERICA
 WinnerRunner up
Best broker Karbone Evolution Markets
Best trading company 3 Degrees DTE Energy
Best advisory Karbone Evolution Markets
Best law firm =Chadbourne & Parke; =Baker & McKenzie  
RENEWABLE ENERGY CERTIFICATES - EUROPE
 WinnerRunner up
Best broker Enegia Group Cleanworld
Best trading company South Pole Group  
Best advisory South Pole Group  
Best law firm Baker & McKenzie  
RENEWABLE ENERGY CERTIFICATES - AUSTRALIA
 WinnerRunner up
Best broker TFS Green  
Best law firm Baker & McKenzie  
RENEWABLE IDENTIFICATION CERTIFICATES
 WinnerRunner up
Best broker Element Markets  
Best trading company Bluesource  
Best advisory Element Markets  
Best law firm Baker & McKenzie