Whatever happened to JP Morgan?

After a grim 2009 for carbon offsetters, the green shoots of recovery were beginning to sprout last year, according to the more optimistic winners of Environmental Finance’s annual voluntary carbon markets survey – announced this week. As the global economic picture brightens, more companies are beginning to reconsider carbon offsetting, they say – and companies are once more stepping in where governments are failing to act.

And the US ‘pre-compliance’ market – where voluntary reductions are bought and sold with a view to looming regulatory mandates – was saved from collapse at the end of last year. While the November mid-terms spelt the death, for two years at least, of federal cap and trade, voters in California saw off an attempt to put its carbon trading plans into deep freeze.

Recovery in both sections of the market is likely to be modest and slow moving – as might be expected given the stuttering economic recovery in most developed economies, and the general lower priority accorded to climate change and carbon markets since the Copenhagen bust-up at the end of 2009.Winners of the Environmental Finance Voluntary Carbon Market Survey

But figures collated by our sister publication, Carbon Finance, show the issuance of voluntary offsets accredited by the American Carbon Registry, the Voluntary Carbon Standard, the Gold Standard and the Climate Action Reserve was up 6% month-on-month in January, at 97 million tonnes of carbon dioxide equivalent.

However, what was most striking about the results of our survey was the almost complete disappearance of JP Morgan and its recent acquisitions from the voting. Last year, the US investment bank took the Best Trading Company slot. ClimateCare, its voluntary market wing acquired in 2008, won Best Offset Retailer. And EcoSecurities, the carbon project pioneer that JP Morgan look private in late 2009, was voted Best Project Developer.

How the mighty are fallen. This year, the bank and its partners barely moved the needle. EcoSecurities and ClimateCare garnered a handful of votes; JP Morgan itself won none.

Has it taken its eye off the ball? Is it struggling to integrate its purchases? Or has it diverted its environmental markets attention to mandatory markets? (Although it didn’t figure in the winners of our broader Carbon Markets Survey, the results of which were announced in December.)

The answer probably lies in the cold calculation that JP Morgan’s bankers are making on the prospects of the carbon markets rapidly expanding. The EcoSecurities acquisition was driven by two different parts of the bank; the commodity trading division, which was enthusiastic about opportunities in the carbon markets and saw in EcoSecurities a global origination platform to supply carbon credits to US and European clients; and the private equity team, who priced its carbon portfolio out to the end of 2012 – and not beyond.

With the stalling of the international talks and a much-reduced US carbon markets, JP Morgan appears to have dramatically scaled back its ambitions. Certainly, EcoSecurities has closed a raft of offices and seen large numbers of staff depart – and what was once one of the most visible companies in the carbon markets now has a much reduced profile. What was once a bold move by a banking powerhouse into a promising new market is now all about cost cutting and value preservation.

Let’s hope that that changes soon. In the meantime, let’s salute those that have stepped in to fill its shoes: oil trader Vitol, project developer South Pole Carbon Asset Management, offset retailer The CarbonNeutral Company.

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