{"id":13161,"date":"2016-11-04T17:19:54","date_gmt":"2016-11-04T21:19:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-commodity-trader-move-into-carbon-emissions-trading\/"},"modified":"2016-11-04T17:25:05","modified_gmt":"2016-11-04T21:25:05","slug":"from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/","title":{"rendered":"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading"},"content":{"rendered":"

Mercuria Energy Group is one of the world\u2019s largest commodity trading companies which trades a vast portfolio of commodities ranging from coal to crude oil. Founded in 2004, Mercuria had expanded into five continents with over 30 trading offices transacting billions of dollars\u2019 worth of commodities each year [1]. Despite its rapid growth over the past years, the company\u2019s trading activities have been primarily focused in hyper-competitive markets of crude oil and refined petroleum products where it competes head on with some of the world\u2019s largest corporations like Shell and BP. With its ambitious growth plan in 2010, Mercuria eyed an expansion into one of most newly-developed commodity market: carbon emissions.<\/p>\n

\"Source:<\/a>
Source:
http:\/\/www.mercuria.com\/trading\/middle-distillates<\/figcaption><\/figure>\n

What creates the market for carbon emissions?<\/em><\/strong><\/p>\n

Upon signing of the Kyoto Protocol in 1997, over 190 countries agreed to adhere to carbon emissions reduction target over the 2008-2012 commitment period [2]. Further, the protocol permits countries with surplus emission credits to sell their credits to another country, thereby creating an international market for carbon emissions credit [3]. This creates a new and attractive carbon emissions market, but why would a traditional oil trading company like Mercuria enter into carbon emissions market?<\/p>\n

 <\/p>\n

There were a few reasons that perhaps drive Mercuria\u2019s decision to enter carbon emissions trading. First, the Kyoto Protocol\u2019s cap on carbon emission has serious monetary implications on most businesses operating in both developed and developing countries. The cap and trade program allows for trading of carbon emissions which will likely result in a multibillion-dollar carbon emissions market. This represents a relatively untapped and potentially lucrative market for Mercuria who has faced intense competition for market share in the petroleum commodities market.<\/p>\n

\"Source:<\/a>
Source:
http:\/\/www.mercuria.com\/trading\/power<\/figcaption><\/figure>\n

Second, Mercuria\u2019s operating model and global commodity trading infrastructure can readily support trading activities for more or less any commoditized products, including carbon emissions, regardless of its primary focus in petroleum commodities markets. Mercuria\u2019s existing trading infrastructure and risk management system allows Mercuria to conveniently accommodate carbon emissions trading, giving the company considerable competitive advantage to enter into carbon emissions trading at a considerably low cost of entrance.<\/p>\n

Third, as climate change become a major area of concern in many jurisdictions, Mercuria as well as other oil trading companies likely acknowledges the pressure from regulators and the community to take part in reducing the global carbon footprint. Interestingly, Switzerland, which is home to Mercuria and other top commodity trading companies, has committed to achieving a 50% reduction in greenhouse gas emissions by 2030 [4]. This is an ambitious national goal that would inevitably require cooperation from Swiss industrial and energy companies, including Geneva-based Mercuria.<\/p>\n

 <\/p>\n

From oil trader to global leader in carbon emission trading<\/strong><\/p>\n

“Our target is to be one of the world’s largest and most active carbon emissions traders,” said Mercuria Energy President Marco Dunand”. [5]<\/em><\/p>\n

In 2010, Mercuria started pursuing its goal to become the world\u2019s leader in carbon emissions market by acquiring from Morgan Stanley the Miami-based global leader in carbon offset project development and one of the pioneers in carbon trading, MGM International. The acquisition of MGM allowed Mercuria to quickly increased its carbon offset project origination capacity and to immediate ramp up its supply of tradable carbon emissions credit [6].<\/p>\n

In November 2011, Mercuria continued to expand its carbon emissions portfolio in Asia by teaming up with a Chinese energy company to form a joint venture company which focuses on China\u2019s carbon trading and emissions market [7]. In April 2012, Mercuria took further steps to underscore its position as the global leader in the carbon emissions market when it participated in the forward sale of over 1.6 tonnes CO2-equivalent greenhouse emission credit to an affiliate of SIFCA, a leading company in West Africa [8].<\/p>\n

 <\/p>\n

Changing market landscape for carbon emissions<\/em><\/strong><\/p>\n

As Mercuria and other commodity trading companies expanded their presence in carbon emissions market, the global carbon market peaked in 2012 with over 10 gigatonnes of CO2-equivalent traded. However, the market unexpectedly declined from 2013 through 2015 due to the oversupply of carbon credits generated by carbon offset projects globally [9].<\/p>\n

\"Source:<\/a>
Source:
http:\/\/climateobserver.org\/wp-content\/uploads\/2016\/01\/Carbon-Market-Review-2016.pdf<\/figcaption><\/figure>\n

As the carbon market continued to decline as a result of the oversupply of carbon credit and the falling carbon credit prices, Mercuria decided to shut down its London-based carbon trading desk in January 2016, let go of two senior traders and move the head of carbon trading to the crude oil desk [10]. Nonetheless, the company claims that it is in the process of adjusting its strategy and resources in response to changing supply and demand dynamics, and remains committed maintain its position as the leader in the carbon emissions market.<\/p>\n

Mercuria\u2019s decisive entrance into carbon emissions market despite its expertise in petroleum trading illustrates the company\u2019s ability to leverage its existing operating model to create additional value from changing market landscape driven by climate change.<\/p>\n

 <\/p>\n

(word count: 800)<\/p>\n

 <\/p>\n

Sources:<\/strong><\/p>\n

[1] Mercuria Energy Trading, \u201cAbout Us\u201d 2016. http:\/\/www.mercuria.com\/about-us. Accessed 4 November 2016.<\/p>\n

[2] United Nations Framework Convention on Climate Change, \u201cParties to the Convention and Observer States\u201d 2014. http:\/\/unfccc.int\/parties_and_observers\/parties\/items\/2352.php. Accessed 4 November 2016.<\/p>\n

[3] United Nations Framework Convention on Climate Change, \u201cEmissions Trading\u201d 2014. http:\/\/unfccc.int\/kyoto_protocol\/mechanisms\/emissions_trading\/items\/2731.php. Accessed 4 November 2016.<\/p>\n

[4] Swissinfo, \u201cHow will energy trading respond to climate change target\u201d 2015. http:\/\/www.swissinfo.ch\/eng\/the-big-players_how-will-energy-trading-respond-to-climate-change-targets-\/41335764. Accessed 4 November 2016.<\/p>\n

[5] PRNewswire, \u201cMercuria Energy Expands Activities In Carbon Trading\u201d 2016. http:\/\/www.prnewswire.com\/news-releases\/mercuria-energy-expands-activities-in-carbon-trading-62164257.html Accessed 4 November 2016.<\/p>\n

[6] Mercuria Energy Trading, \u201cMercuria Energy Group Makes Strategic Carbon Business Acquisition\u201d 2016. http:\/\/www.mercuria.com\/media-room\/business-news\/mercuria-energy-group-makes-strategic-carbon-business-acquisition. Accessed 4 November 2016.<\/p>\n

[7] Reuters, \u201cMercuria, China’s Datang form carbon JV\u201d 2016. http:\/\/www.mercuria.com\/media-room\/business-news\/mercuria-energy-group-makes-strategic-carbon-business-acquisition. Accessed 4 November 2016.<\/p>\n

[8] Mercuria Energy Trading, \u201cCertified Emission Reductions: Mercuria Participated in Record Transaction\u201d 2016. http:\/\/www.mercuria.com\/media-room\/business-news\/certified-emission-reductions-mercuria-participated-record-transaction. Accessed 4 November 2016.<\/p>\n

[9] Thomson Reuters, \u201cCarbon Market Monitor\u201d 2016. http:\/\/climateobserver.org\/wp-content\/uploads\/2016\/01\/Carbon-Market-Review-2016.pdf. Accessed 4 November 2016.<\/p>\n

[10] Carbon Pulse, \u201cMercuria shutters London-based emissions trading desk \u2013sources\u201d 2016. https:\/\/carbon-pulse.com\/14648\/. Accessed 4 November 2016.<\/p>\n

[11] Mercuria Energy Trading, \u201cEnvironmental Markets\u201d 2016. http:\/\/www.mercuria.com\/trading\/environmental-markets. Accessed 4 November 2016.<\/p>\n

Featured Image Source:\u00a0<\/strong>http:\/\/www.mercuria.com\/trading\/gasoline-and-naphtha<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Mercuria Energy Group is one of the world\u2019s largest commodity trading companies which trades a vast portfolio of commodities ranging from coal to crude oil. Founded in 2004, Mercuria had expanded into five continents with over 30 trading offices transacting […]<\/p>\n","protected":false},"author":2457,"featured_media":13234,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-13161","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nFrom Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Mercuria Energy Group is one of the world\u2019s largest commodity trading companies which trades a vast portfolio of commodities ranging from coal to crude oil. Founded in 2004, Mercuria had expanded into five continents with over 30 trading offices transacting […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2016-11-04T21:25:05+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Trading_Gasoline-and-naphtha_large.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"720\" \/>\n\t<meta property=\"og:image:height\" content=\"333\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/\",\"name\":\"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/Trading_Gasoline-and-naphtha_large.jpg\",\"datePublished\":\"2016-11-04T21:19:54+00:00\",\"dateModified\":\"2016-11-04T21:25:05+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/Trading_Gasoline-and-naphtha_large.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/Trading_Gasoline-and-naphtha_large.jpg\",\"width\":720,\"height\":333},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/","og_locale":"en_US","og_type":"article","og_title":"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management","og_description":"Mercuria Energy Group is one of the world\u2019s largest commodity trading companies which trades a vast portfolio of commodities ranging from coal to crude oil. Founded in 2004, Mercuria had expanded into five continents with over 30 trading offices transacting […]","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/","og_site_name":"Technology and Operations Management","article_modified_time":"2016-11-04T21:25:05+00:00","og_image":[{"width":720,"height":333,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Trading_Gasoline-and-naphtha_large.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/","name":"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Trading_Gasoline-and-naphtha_large.jpg","datePublished":"2016-11-04T21:19:54+00:00","dateModified":"2016-11-04T21:25:05+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Trading_Gasoline-and-naphtha_large.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Trading_Gasoline-and-naphtha_large.jpg","width":720,"height":333},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/from-oil-to-carbon-how-global-energy-trader-moved-into-carbon-emissions-trading\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"From Oil to Carbon: How Global Energy Trader Moved Into Carbon Emissions Trading"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/13161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/2457"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=13161"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/13161\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/13234"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=13161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=13161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}