Barclays Capital unveils carbon index

Investment banking giant Barclays Capital has today launched a carbon index designed to track the performance of the emerging global carbon market.

The company said that Barclays Capital Global Carbon Index (BGCI) would track the performance of credits issued through the world's major carbon trading schemes, including the EU Emissions Trading Scheme (ETS) and the UN's Clean Development Mechanism (CDM).

A spokesman for the company said that there was already an index for monitoring performance of EU Allowances (EUAs) within the ETS, but that the Barclays index represents the first index for tracking the whole global carbon market. He added that other major trading schemes would be added as they are introduced.

The BGCI will provide a benchmark against which investors can assess the performance of their investments in carbon credits, the company said. Such indexes are regarded as a key component in the development of more complex financial instruments that will allow investors to exploit the burgeoning carbon market.

Currently, an investor buying Certified Emission Reductions (CERs), for example, has to assess their performance against the initial price paid for the credits, but the index will allow them to also measure performance against the rest of the market.

Louis Redshaw, head of environmental markets at Barclays Capital, said that the new index would provide a valuable service ahead of an expected boom in the carbon trading market next year. "As we move towards the launch of the first phase of the Kyoto protocol and the second phase of the EU Emissions Trading Scheme, we expect the market to grow significantly as both corporates and investors look to manage their risks and leverage new opportunities," she observed.