Fund-raising for carbon credits plan put off

Fund-raising for the Middle East's first carbon trading scheme has been postponed to late next year due to the current financial crisis, a senior official of Qatar's Doha Bank said.

Doha Bank, Qatar's largest private commercial bank, plans to start the Arabian Gulf's first carbon-credits exchange in 2009 to tap an emerging market for emissions trading.

Last year it announced it aims to sell a $1 billion (Dh3.67bn) sukuk to finance investment in renewable energy by the middle of 2008, using the money for projects such as setting up an exchange for trading greenhouse gas emissions permits.

Doha Bank Chief Executive Officer Raghavan Seetharaman told Emirates Business yesterday he would keep the planned sukuk until the market regains consumers' confidence.

"Things are currently not getting any better because of the credit crunch, so I am going to hold it perhaps until next year. Why should I be taking a price that is not cost effective? I have to make money out of it," Seetharaman said on the sidelines of a conference in Dubai.

He said the dynamics of the financial markets had changed since it announced the plan but it would push the sukuk at the right time.

Under the 1997 Kyoto Protocol, the UN started managing the Clean Development Mechanism, which encourages developing nations to cut production of greenhouse gases by earning carbon credits that can be bought and traded by firms in industrialised nations.

The global emissions trading market more than doubled to $30bn last year, according to Point Carbon, a Norway-based research firm.

Doha Bank is working with the San Francisco, California-based RainTrust Foundation on the Qatar exchange project and has secured expressions of interest from Citigroup and Credit Suisse Group.

Doha Bank will invest $27m in its electronic Qatari exchange, and has so far spent $7m on a plot of land in the $2.6bn Energy City business park that Qatar is building to lure international oil and gas companies.

The plot adjoins that of International Mercantile Exchange Holdings, an energy derivatives bourse under formation by investors, including Bahrain-based Gulf Finance House, Kuwait Investment and Abu Dhabi Investment House.

"The time depends on what happens across the world but other works are going on as schedule. We have applied to the regulators, bought a space in the energy city and currently we are integrating the processes and technologies," Seetharaman said. Doha Bank earlier said it would complete the business plan for its profit exchange in September 2008.

The Chicago Climate Exchange in August last year said it would start offering certified emission reduction futures contracts, or CERs, because they're becoming the international currency in global markets for reducing greenhouse gas emissions.

"Gulf countries aren't required to generate carbon credits under Kyoto but there are financial incentives for them to do so," said Souheil Abboud, regional manager for Dublin-based emissions trader EcoSecurities. "We see huge potential for Gulf companies to reduce their emissions, generating a lot of credits to sell, but it's early days yet."

EcoSecurities opened a Middle East office in Dubai last year and has helped state-run Qatar Petroleum register its Al Shaheen field project under the Clean Development Mechanism.

In June 2007, the Irish company said it would join the state-run Dubai Multi-Commodities Centre business park to help turn Dubai into a regional centre for carbon emissions trading.

Mubadala Development, an investment company owned by the Abu Dhabi Government, also said its Masdar unit plans to earn the UAE's first tradable carbon credits by helping Dubai

Aluminium cut production of pollutants known as perfluorocarbons.

The numbers

$1bn: Doha Bank to sell a sukuk of this value

$30bn: Value of the global emissions trading market last year

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