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May 06, 2010
IntercontinentalExchange Acquires Climate Exchange
    by Robert Kropp

The acquisition anticipates substantial growth in the global carbon market if the US adopts a mandatory cap-and-trade program.

The IntercontinentalExchange (ICE), an Atlanta-based operator of regulated exchanges for the agricultural, credit, currency, emissions, energy, and equity index markets, announced last week that it has acquired the Climate Exchange (CLE), a London-based operator of carbon emissions trading platforms in the US and Europe. The ICE offer valued CLE at $604 million, a 57% premium to the share price of CLE.

CLE operates three emissions trading platforms. The
European Climate Exchange trades emissions credits for the mandatory European Emissions Trading Scheme. The US-based Chicago Climate Exchange (CCX) operates North America’s only cap and trade system for greenhouse gas (GHG) emissions management, and the Chicago Climate Futures Exchange (CCFE) operates a US-based market for environmental derivatives.

Founded by Richard Sandor, CCX launched in 2003, and currently has nearly 300 members that make a legally binding commitment to meet annual GHG emission reduction targets. Members that emit above the targets comply by purchasing CCX Carbon Financial Instrument contracts.

As progress on climate change legislation seems to have stalled in the Senate, the US, unlike Europe, does not have a mandatory cap-and-trade program. While President Obama remains publicly supportive of a price on GHG emissions, he acknowledged in March that a climate change bill passed by the Senate is unlikely to include a cap-and-trade provision at this time.

Despite the premium paid for CLE by ICE, the deal could well turn out to be extremely profitable for the buyer, should the US eventually adopt a mandatory cap-and-trade program. In 2008, the
Carbon Markets division of New Energy Finance (purchased in December 2009 by Bloomberg) estimated that the global carbon market could grow to more than $1 trillion by 2020, if the US adopts a cap-and-trade program.


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