Carbon market hub
The Stern Review on the Economics of Climate Change highlighted the major economic opportunities that will arise from the development of carbon markets to buy and sell pollution permits and, in particular, the professional services needed to support a carbon market.
What is a carbon market hub?
A financial hub is a centre of business, which forms as businesses concentrate in a particular city to access regional market opportunities, infrastructure, networks and human capital.
As in other types of financial markets, hubs will form and concentrate carbon markets in particular locations. London is the carbon market hub for Europe, and over time a carbon market hub will form in the Asia-Pacific.
A carbon market hub is a cluster of firms in one location supplying the following types of services:
- trading services which permit trading activities, including futures trading and the development of new derivatives markets
- corporate and project finance to finance investments in developing and installing new technologies
- MRV (monitoring, reporting and verification) services which measure and audit emissions to ensure that one tonne of carbon emitted or reduced in one place is equivalent to a tonne of carbon emitted or reduced elsewhere
- brokers who facilitate trading between individual firms or groups within a scheme, and also offer services to firms not covered by the scheme who can sell emission reductions from their projects
- carbon asset management and strategy to help companies manage the financial liabilities arising from their greenhouse gas emissions and strategies for cutting their emissions
- registry services to manage access to, and use of, the registry accounts that hold allowances necessary for surrender to the regulator
- legal services to manage the contractual relationships involved in trading and other schemes.
(Source: Stern Review on the Economics of Climate Change)
Why is Sydney the best place in the Asia-Pacific region for a carbon market hub?
Sydney is uniquely positioned as the regional carbon market hub for the Asia-Pacific. The city is the first major financial centre to open in the Asia time zone, providing a trading day that bridges the closing of the US market and the opening of European markets.
Sydney is the Australian centre for financial services, and recognised in Foreign Policy's Global Cities Index and the City of London's Global Financial Centres Index as one of the world's leading financial centres with world-class infrastructure.
Sydney is home to:
- the Australian Securities Exchange (ASX), the Sydney Futures Exchange and high-volume derivatives markets
- head offices of major national and international banks, fund managers and brokerage firms - of the 55 authorised deposit-taking banks in Australia, 53 are based in Sydney
- major financial market governance infrastructure, such as the Australian Securities and Investment Commission.
Sydney's financial services workforce is also acknowledged as world-class. Foreign Policy's Global Cities Index ranks Australia's human capital as eighth best in the world. More than 40% of Australian employment in the finance and insurance industry is concentrated in Sydney.
Sydney is already home to a workforce with experience in carbon markets. There is a significant cluster of energy companies, financial service providers, and legal and accounting firms with several years' experience in carbon trading under the NSW Government's Greenhouse Gas Reduction Scheme. The scheme was one of the first mandatory emissions trading schemes in the world, introduced in 2003 and still the world's second-largest carbon market in both volume and value of carbon credits (Source: The World Bank).
For further information on carbon market opportunities for your business, visit the Department of Trade and Investment, Regional Infrastructure and Services website.
Sydney Carbon Market Taskforce
The NSW Government established the Sydney Carbon Market Taskforce to assist in the development and implementation of a strategic action plan to make Sydney the carbon trading and finance hub for the Asia-Pacific region.
The taskforce comprises a panel of experts in relation to carbon markets including:
- Adjunct Professor Martijn Wilder (Chair) - Partner and Head of Baker & McKenzie Global Climate Practice and Adjunct Professor Climate Change Law, Australian National University
- David Gonski, AC - Chancellor, University of NSW; Chairman, Investec Bank (Australia); and Chairman and Non-Executive Director, Coca-Cola Amatil Ltd
- Professor Fred Hilmer, AO - Vice-Chancellor and President University of NSW
- Dr Michael Molitor - CEO, Carbon Shift Ltd
- Jillian Broadbent, AO - Board Member, Reserve Bank of Australia
- Anthony Collins - General Manager, Emerging Markets, Australian Securities Exchange
- John Marlow - Global Head, Environmental Products, Macquarie Bank, London
- Emma Herd - Director, Emissions and Environment, Westpac
Page last updated: 24 May 2011