LONDON - Trade in the fledgling UK market in carbon emissions allowances has picked up, with prices rising as companies try to meet targets to cut greenhouse gases, brokers said at a industry conference last week.

Many British firms now have targets to cut their emissions of greenhouse gases from fossil fuel use, such as carbon dioxide, blamed by many scientists for global warming.

If they make these targets they can gain carbon allowances to sell under the voluntary UK emissions trading scheme, launched in April. Companies that miss their goal can buy allowances to offset their emissions.

Carbon allowances were between three and six pounds in April, though prices are likely to be volatile because of illiquidity.

Emissions trading was one of the means set out by the U.N. Kyoto Protocol to reduce greenhouse gases. The UK was keen to kickstart the process, ahead of a proposed mandatory EU system for carbon dioxide by 2005 and possible international trading by 2008.

Thirty-four organisations entered the scheme directly, with nearly 6000 other companies expected to join UK trading this year, already holding agreements to cut emissions under the climate change levy scheme, for which they will receive tax rebates on energy use.

"We've seen a significant rise in the price of UK allowances in recent weeks, which has been principally driven by companies with climate change agreements hedging their exposure to losing the rebate," Tim Atkinson, of brokers Natsource, told Reuters.

He said the market was now trading daily.

Analysts at the Emissions Trading Stategies conference in London were divided as to which way the price would move.

"The climate change levy is an enormous incentive to start trading," said Ian Calvert of British Sugar, adding that at the current price it was much cheaper for companies to buy allowances than risk losing their tax rebate.

But Steen said: "I think the price will go down - there's potentially large volumes from big companies.

"The big players are not doing a lot of trading yet as they are still verifying (their emissions levels)."

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The electricity sector across North America is currently experiencing a wave of unprecedented and rapid change. The opening of electricity markets to competition is underway or being considered in Canada, Mexico and the United States, and cross-border trade in electricity is growing, bolstered in part by the long-term stability conferred by NAFTA’s trade and investment rules.

As these changes take place, many important questions are being asked about the emerging North American electricity market. One question—the focus of this Article 13 Report—encapsulates a key public policy challenge facing today’s decision-makers. How can we ensure that North Americans have an affordable and abundant supply of electricity without compromising environmental and health objectives? Clearly electricity is vital for the North American economy and is a prerequisite for economic stability and long-term prosperity. Just as clearly, however, some forms of production, transmission and use of electricity may have significant negative impacts on human health and the ecological systems that sustain life, both of which are valued highly by North Americans.

As outlined by the CEC Electricity and Environment Advisory Board in this report, we believe that it is possible to realize the economic opportunities offered by the evolving North American electricity market and at the same time protect human health and the environment. The key to meeting both these goals is increased cooperation and collaboration among the NAFTA partners. Cooperation needs to encompass not only environmental protection policies, but also the collection of emission information, improved impact assessment, the promotion of renewable energy and energy efficiency, increased technology transfer, and other matters. By working together to a common end, Canada, Mexico and the United States can ensure that the transformation of the North American electricity market contributes to sustainable development by generating economic, social and environmental benefits.

Janine Ferretti
Executive Director
CEC Secretariat

Background paper

• A Retrospective Review of FERC’s Environmental Impact 
  Statement on Open Transmission Access
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation
• A Review: Environmental Challenges and Opportunities of 
  the North American Electricity Market symposium
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation
• Assessing Barriers and Opportunities for 
  Renewable Energy in North America
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation
• Design and Legal Consideration for North American Emissions Trading
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation
• Environmental Challenges and Opportunities of 
  the Evolving North American Electricity Market
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation
• Estimating Future Air Pollution from New Electric Power Generation
  Secretariat Report to Council Under Article 13 of the North American Agreement on Environmental Cooperation

• European Electricity Generating Facilities: An Overview of European 
  Regulatory Requirements and Standardization Efforts
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation

• Modeling Techniques and Estimating Environmental Outcomes
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation

• NAFTA Provisions and the Electricity Sector
  Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation

• Comments
  Government comments on Environmental Challenges and 
  Opportunities of the Evolving North American Electricity Market

• Related CEC news
  CEC presents environmental profile of North American electricity market

Electricity generated from renewable energy sources is becoming increasingly available nationwide. By choosing green power instead of conventional electricity, consumers, businesses, and organizations can increase renewable energy generation-helping to improve air quality, protect the environment, and increase energy independence. When enough electricity customers choose green power, the market will transform to one of cleaner resources with long term economic and supply benefits.

The U.S. Environmental Protection Agency, the U.S. Department of Energy, and the Center for Resource Solutions (CRS) are sponsoring the Second Annual Green Power Leadership Awards. To recognize the actions of organizations that are significantly advancing the development of renewable energy sources by buying green power, the U.S. Environmental Protection Agency and the U.S. Department of Energy are promoting the Green Power Leadership Awards for Green Power Purchasers. The awards banquet will be held in conjunction with the Seventh National Green Power Marketing Conference at the Loews L'Enfant Plaza Hotel in Washington, D.C. on Monday, September 30, 2002.

The Green Power Leadership Awards is a recognition program of the Green Power Partnership, a new EPA voluntary program developed to build demand for green power among large electricity users in the commercial, industrial, and public sector. Partners pledge to switch a portion of their electrical load to green power and receive technical assistance and recognition for their efforts. Additional information about the Green Power Partnership is available at http://www.epa.gov/greenpower.

EPA and DOE Invite You to Apply
http://www.epa.gov/greenpower/gpleadership/gpleadership.htm