By Mathew Carr

Nov. 1 (Bloomberg) -- Aquila's Carbon Opportunity Fund, advised by 3C Holding AG near Frankfurt, will exploit the difference between EU permits and the UN's certified emission reduction credits, said Clemens Huttner, head of carbon investment advisory at 3C. Trading would start later this month, Huttner said today by phone.

The fund will also bet on the difference in price between 2008 permits and 2012 permits, and eventually in proposed U.S. emission markets once they start, Huttner said. It will also trade emission reduction units, he said.

The value of global emissions trading tripled to $30.1 billion last year, World Bank figures show. The UN is seeking to limit emissions starting 2013 under a global agreement between nations that will replace the 1997 Kyoto Protocol.

EU allowances for December 2008 were today at 21.75 euros a metric ton, according to the European Climate Exchange in London at 12:37 p.m. local time. CER credits were at 17.45 euros, according to the Nord Pool exchange in Lysaker, Norway.

Factories and oil refineries are selling EU permits and buying the cheaper UN credits to cut the cost of complying with the region's environmental laws.

Performance Fee

Aquila has raised an unspecified amount for its fund, Mark Milne, the group's Switzerland country manager, said today by telephone from Hamburg, Germany. The fund, with a minimum subscription of 500,000 euros, was targeting returns of 20 percent a year, according to an e-mailed document. The annual management fee is 2 percent, with a performance fee as high as

20 percent.

The fund will hold its trading positions open for as little as a few days to as long as several months, Milne said. It will to a lesser extent make trades that bet on the direction of emission-permit prices, he said. ``It's not so much directional trading, but arbitrage.''

--Editor: Cunningham (kls)

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