Trafigura bets troubled CO2 credits market will rebound

Firm is betting new regulatory frameworks will propel the instruments to the mainstream

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Trafigura Group, the commodities trading giant, is positioning for record growth in the beleaguered market for carbon credits, as it bets new regulatory frameworks will propel the instruments into the mainstream of emissions accounting.

Across jurisdictions, "increased and mounting regulation" designed to rein in emissions is reshaping the market for carbon credits, said Hannah Hauman, global head of carbon trading at Trafigura. The development means that a product once treated as a form of "corporate experimentation" is now set to join the ranks of "investment-grade assets and operations," she said during a recent interview in Azerbaijan.

Carbon credits, which companies use to compensate for their emissions, have emerged as one of the more controversial corners of climate finance. Recurring allegations of greenwashing last year coincided with a 23% slump in the value of the so-called voluntary carbon market on which such credits are traded, as bankers and corporations backed away.

HSBC Holdings Plc has now shelved plans to build a carbon credits trading and finance desk. Shell Plc is taking steps to sell a majority stake in its portfolio of nature-based carbon credit projects. And Delta Air Lines Inc., Alphabet Inc.'s Google and Easyjet Plc are among companies that have retreated from the market.