Ex-Barclays Carbon Chief Trades From Home as Prices Surge

By Mathew Carr February 06, 2014

LONDON, February 6 (Business Week) – Louis Redshaw, the former head of carbon trading at Barclays Plc (BARC), returned to the market amid a jump in permit prices since he left the bank in April.

Redshaw, 41, who resigned from Barclays in London after more than eight years at the company, is buying and selling European Union permits for his own account from his home in the southeast of the capital, he said by phone, declining to provide further details. Allowances climbed 33 percent this year, the best performance of 80 commodities tracked by Bloomberg. They rose to their highest level in more than a year today, trading at 6.74 euros ($9.17) a metric ton on the ICE Futures Europe exchange in London.

EU lawmakers are completing details of a plan to curb an unprecedented oversupply and boost prices, which fell to a record in April. Allowances may rise to as high as 15 euros by 2015, according to Patrick Hummel, an analyst at UBS AG.

“There’s no reason why the market shouldn’t double within the next 18 months,” said Redshaw, who also worked as a trader at Enron Corp. and Electricite de France SA. (EDF) “At 6 euros, it’s still cheap.”

Carbon trading volume on ICE jumped 21 percent to a seven-month high in January compared with December.

As well as postponing the sale of some permits, the European Commission is proposing a permanent reserve of allowances to smooth future surpluses or shortages starting 2021. Permits plunged to 2.46 euros in April as the surplus was exacerbated by the region’s longest recession.

Regulator’s Commitment

Such a reserve is less prone to interference by politicians and it’s based on transparent rules set out in advance, making the market attractive, said Redshaw, who argued against intervention when he was at Barclays. “It demonstrates the commitment of the commission to deal with the oversupply problem,” he said.

The reserve will help restore confidence in the EU’s market, Martin Schoenberg, the head of policy at London-based Climate Change Capital Ltd., said.

“If the EU manages to re-establish its emissions trading system as the central pillar of climate policy, that will create growing interest in carbon markets across the world,” Schoenberg, who previously worked at the Bonn-based United Nations Framework Convention on Climate Change secretariat, said Feb. 4 by phone. Carbon prices may average about 40 euros a ton from 2019 to 2030, according to Climate Change Capital.

Redshaw began trading in early January, about a month after the region’s parliament voted in favor of the temporary measure to curb an unprecedented glut of permits.

“The commission’s support from the parliament cemented that fact and the future of the market,” Redshaw said. “I’ve been watching developments and now is the right time to get back involved.”

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net