Socit Gnrale Index (SGI) and orbeo have launched the SGI orbeo Carbon Credit Index, designed to give institutional investors, asset managers and private banks direct access to the carbon underlying.
The Index is the first of its kind to be designed with dynamic allocation that will aim to maximise the performance through time of two underlying carbon credits: European Emission Allowances (EUAs), allotted by the European Commission under the European Union Emission Trading Scheme (EU ETS), and Certified Emission Reductions (CERs), issued under the CleanDevelopment Mechanism governed by the Kyoto Protocol which aims at promoting emission reduction projects in emerging countries.
Under the EU ETS, CER can be used for compliance up to a percentage of the allocation of each installation. This percentage varies country by country and is on average 13.7%, representing 1.4 Giga tonnes over 2008-2012.
The Index will initially be based on 50% EUAs and 50% CERs. The significant share of CERs compared to the import limits is intended to capture the future benefits from the present undervaluation of CERs relative to EUAs.
The SGI orbeo Carbon Credit Index will be overseen by an independent review committee comprised of six persons, appointed by Socit Gnrale, orbeo and Standard & Poors, the Index Calculation Agent. Committee members will be chosen in order to bring expertise from a wide variety of backgrounds and will assess the opportunity to adapt the index structure to optimise performance.
The Index will be calculated and published on a daily basis by Standard & Poors, a division of the McGraw-Hill Companies, Inc.