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The growing market for paying for carbon emissions could become a larger market than the one for crude oil, according to the head of carbon trading at Trafigura, one of the world’s largest commodity traders.
The carbon market has the potential to become 10 times larger than the global crude oil market, Hannah Hauman, Global Head of Carbon Trading at Trafigura, said at FT Commodities Global Summit on Wednesday, as carried by Bloomberg.
The biggest commodity traders are looking at growing opportunities in carbon trading and trading in energy transition metals.
Amid booming demand for key metals in the energy transition, commodity traders, and some hedge funds are racing to hire metals traders to capitalize on the demand for critical minerals, Reuters reported earlier this month, quoting sources with direct knowledge of the hiring spree.
Trafigura, for example, became last year the first commodity trading company to establish a low-carbon aluminum trading desk and established a non-ferrous metals business development unit. During 2020, Trafigura’s non-ferrous Metals and Minerals department recorded its most successful performance, the trader said in its annual report. Last year was also the first full year after restructuring the department into four books: copper, zinc and lead, nickel and cobalt, and aluminum.
Muriel Schwab, group chief financial officer at Gunvor, told the FT Commodities Global Summit today that the trader had “shifted trading towards transitional commodities,” Financial Times Energy Editor David Sheppard reports.
Along with commodities crucial to the energy transition, the biggest traders also look to capitalize on the rising carbon prices in a growing market for carbon emissions trading as more and more governments pledge net-zero emission goals.
The biggest carbon market in the world, the EU carbon market, saw record-high carbon prices in early May—prices exceeded US$60.50 (50 euro) per ton, surging by more than 50 percent so far this year. Analysts believe prices will rise more with the EU issuing increasingly strict environmental policies and studying putting a price on carbon for road transportation and aviation fuels.
Lawson Steele, joint head of carbon and utilities research at Berenberg, told CNBC last month that his target for the EU carbon price at the end of this year is double the current levels at US$133 (110 euro) per month.
