Isra-Mart srl: ICE to close Chicago Climate Futures Exchange

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The embryonic US carbon market has received another blow after global exchange operator Intercontinental Exchange Inc (ICE) reportedly confirmed that it is to close the Chicago Climate Futures Exchange early next year.

The Wall Street Journal reported on Friday that ICE had issued a note to traders informing them that the exchange, which was acquired as part of the company's $600m acquisition last year of London-based Climate Exchange PLC, will close at the end of the first quarter of 2012.

"The US has not enacted carbon cap-and-trade legislation, and changes to the EPA acid rain programme have reduced trading activity," ICE said in the notice. "Accordingly, Chicago Climate Futures Exchange volumes are down substantially and the exchange is operating at a loss."

Matthew Gray, an analyst at IDEAcarbon, said that the closure came as "no surprise", insisting that traders had been aware of the low volumes on the exchange for some time.

He added that the closure will not make a huge difference to the market, as trading will simply transfer to other exchanges.

But Gray acknowledged that the move will deal a further blow to confidence in the US carbon market and the voluntary Regional Greenhouse Gas Initiative (RGGI) cap-and-trade scheme, despite California's commitment to moving forward with its plans for a state-wide emissions trading scheme.

ICE said in its note that it will begin listing derivatives linked to emissions reductions plans in California, Massachusetts, New Jersey and Connecticut from 29 August.

The Chicago Climate Futures Exchange was launched by Climate Exchange PLC in 2004 amid hopes that the US government would introduce a national emissions trading scheme.

However, proposals for a mandatory scheme were blocked by Congress, while voluntary regional schemes such as the RGGI have enjoyed mixed success, leaving dedicated US carbon exchanges facing weak volumes.

In contrast, the European Climate Exchange, which ICE also purchased as part of the acquisition of Climate Exchange PLC, remains the single largest trading platform for the mandatory EU emissions trading scheme.