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    MNM Service What is it? Latest Edition Search Archive
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Environmental News From the Communications Centre Contributed by Aristide Mbiock IJmuiden, NL, 30th July 2001 - Ref.:0107art25
CO2 emissions trading long way off despite Kyoto deal LONDON - Trading of greenhouse gas emissions may be the solution in the future to reduce industrial pollution, but specific trading rules have first to be adopted and recognised globally, experts say. A deal reached in Bonn on Monday to cut greenhouse gases (GHG) by an average of 5.2 percent below 1990 levels by 2012 will set the basis for a global emissions trading market, but will not be enough by itself.The deal, reached by environment ministers at an international summit in Bonn, was a last minute compromise to rescue the 1997 Kyoto Treaty, rejected by the U.S. government. "The agreement reached doesn't give much guidance. What is important is what countries will do to establish emissions rules for companies," said Gareth Edward, head of GHG trading at Natsource, one of the leading broker in emissions trading. The Bonn agreement is even more restricted by the fact that the U.S., the world's biggest polluter and potentially the largest market participant, did not take part. Whatever the obstacles, a global CO2 market is still seen as potentially lucrative because it is wide-ranging and will affect the largest sectors of industry internationally. "The magnitude of the anticipated reductions of GHG emissions is considerable, with the projected annual emissions trading market estimated to be more than $150 billion," said Deutsche bank in London, which is involved in GHG trading. HOW EMISSIONS TRADING WILL WORK The principle of emission trading is simple: a company polluting below its emission allowance can sell the remaining allowance credit to a company which has exceeded its allowance. The allowance, which entitles the holder to emit a limited quantity of greenhouse gases, is denominated in metric tonnes of carbon dioxide equivalent (CO2e) and set by national governments on the basis of international targets. Advocates of the system believe that potential gains from selling credit will give companies incentives to cut emissions. The price of the allowance credit is based on the marginal cost of reducing emissions, which varies widely depending on the industrial sector and the way chosen to cut emissions. Ultimately, traders say the market price will be set by demand and supply. If there is too much demand for allowance credits, the price will rise, making the credits too expensive to buy compared to other options such as investing in emissions cutting technologies. RULES NEEDED FOR TRADING TO TAKE OFF For the system to work internationally, countries will have to recognise emissions cut rules adopted by other nations. So far, only local schemes are emerging but they could lead the way to global trading as promoted by the Kyoto Protocol if the rules are bilaterally accepted. The UK is at the forefront for developing an emission trading scheme which should be finalised in early August. Trading is expected to start next year and brokers say forward prices are already being discussed in the market. Other schemes are being studied in Denmark and the Netherlands and the UK government says it is open to bilateral recognition once trading rules are in place. At the European Union level, the European Commisssion itself is working on a draft directive for an emission trading scheme that will harmonise national schemes and lead to cross-border trading and a single price for carbon across Europe. The directive should be adopted by 2005 and European trading could start in 2007 at the earliest. Eurelectric, the Union of the European electricity industry, has already started an emission trading simulation exercise to help companies become familiar with the concept. NO GLOBAL TRADING SYSTEM WITHOUT U.S. However, market participants agree that it will be difficult to envisage a truly global market without the participation of the U.S., where local schemes are also being set up. For instance, Sulphur Dioxide (SO2) gases, emitted mainly by the burning of coal, are already being traded and initiatives at states level are emerging, but they are not sufficient. "We already see some GHG constraints in Massachussetts and Oregon, but a national policy is needed for a trading scheme to take off," said Natsource's Edward. "The quality of air is a global problem not a local one." Shell
boosts renewable energy arm with acquisition Royal Dutch/Shell, the Anglo-Dutch oil company, on Monday boosted its fledgling renewable energy arm with its first wind farm acquisition in the US. The group said it had agreed to purchase the 50MW Rock River I windfarm in Wyoming from SeaWest WindPower, a privately-owned US green energy developer. It declined to give financial details of the transaction but observers close to the company said it was worth between $50m and $60m. Electricity produced from the wind farm will be sold to PacifiCorp, the US subsidiary of Scottish Power, under a 20 year contract. The project, made up of 50 turbines each of 1MW, will be constructed during the summer and is scheduled to start operating in October. Shell has said it would invest between $500m and $1bn on new energy technologies over the next five years, including hydrogen fuel cells, solar power, biomass and wind. The Wyoming project will be its largest single investment in windpower to date. The previous was the UK's first offshore wind farm at Blyth in the northeast, which cost $4m to build last year. The group is currently progressing plans to build more than 1,000MW of wind generating capacity, including projects in the Irish Sea, Germany, the Netherlands and Morocco. EnBW
says to invest millions of marks in renewables FRANKFURT - Germany's third biggest utility EnBW said last week it plans to invest "millions of marks" in renewable energy projects. Renewable energy sources, such as wind, biomass and solar, are seen as environmentally-friendly alternatives to fossil fuels, the burning of which produces carbon dioxide emissions."EnBW Kraftwerke AG will in the coming years increase its investment in power production from renewable energy," EnBW said in a statement. "The company should, through three-figure million (mark) investments in the biomass and wind energy sectors in particular, achieve further emissions reductions and effective climate protection," it added. The firm is looking at the Schwabian Mountains and the Black Forest as possible sites for wind power plants. In biomass, EnBW said it has had success at a paper pulp plant in Ulm in partnership with the local municipal utility. A further five large biomass plants are planned in Baden Wuerttemberg, where the utility is based. As a result of its renewable energy strategy, EnBW targets a one million tonne cut in CO2 emissions in the medium term. "The economy and lasting ecology are for us not a contradiction, but are ideally joined in the framework of this strategy," said EnBW board member Michael Gassner.
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